Correlation Between BHP Group and ARN Media
Can any of the company-specific risk be diversified away by investing in both BHP Group and ARN Media 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 ARN Media 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 ARN Media Limited, you can compare the effects of market volatilities on BHP Group and ARN Media 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 ARN Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and ARN Media.
Diversification Opportunities for BHP Group and ARN Media
Poor diversification
The 3 months correlation between BHP and ARN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and ARN Media Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARN Media Limited 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 ARN Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARN Media Limited has no effect on the direction of BHP Group i.e., BHP Group and ARN Media go up and down completely randomly.
Pair Corralation between BHP Group and ARN Media
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the ARN Media. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 2.75 times less risky than ARN Media. The stock trades about -0.19 of its potential returns per unit of risk. The ARN Media Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 74.00 in ARN Media Limited on September 1, 2024 and sell it today you would lose (2.00) from holding ARN Media Limited or give up 2.7% 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. ARN Media Limited
Performance |
| Timeline |
| BHP Group Limited |
| ARN Media Limited |
BHP Group and ARN Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and ARN Media
The main advantage of trading using opposite BHP Group and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, ARN Media 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 ARN Media will offset losses from the drop in ARN Media's long position.| BHP Group vs. Infomedia | BHP Group vs. Kneomedia | BHP Group vs. Gold Road Resources | BHP Group vs. Apiam Animal Health |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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