Correlation Between BHP Group and Remgro
Can any of the company-specific risk be diversified away by investing in both BHP Group and Remgro at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BHP Group and Remgro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Remgro, you can compare the effects of market volatilities on BHP Group and Remgro and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BHP Group with a short position of Remgro. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Remgro.
Diversification Opportunities for BHP Group and Remgro
Poor diversification
The 3 months correlation between BHP and Remgro is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Remgro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remgro and BHP Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BHP Group Limited are associated (or correlated) with Remgro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remgro has no effect on the direction of BHP Group i.e., BHP Group and Remgro go up and down completely randomly.
Pair Corralation between BHP Group and Remgro
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Remgro. In addition to that, BHP Group is 1.08 times more volatile than Remgro. It trades about -0.23 of its total potential returns per unit of risk. Remgro is currently generating about -0.18 per unit of volatility. If you would invest 1,597,815 in Remgro on August 27, 2024 and sell it today you would lose (80,215) from holding Remgro or give up 5.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Remgro
Performance |
| Timeline |
| BHP Group Limited |
| Remgro |
BHP Group and Remgro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Remgro
The main advantage of trading using opposite BHP Group and Remgro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Remgro can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Remgro will offset losses from the drop in Remgro's long position.The idea behind BHP Group Limited and Remgro pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Remgro vs. Centaur Bci Balanced | Remgro vs. Growthpoint Properties | Remgro vs. Bowler Metcalf | Remgro vs. Shoprite Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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