Correlation Between BHP Group and Advanced Braking
Can any of the company-specific risk be diversified away by investing in both BHP Group and Advanced Braking 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 Advanced Braking 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 Advanced Braking Technology, you can compare the effects of market volatilities on BHP Group and Advanced Braking 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 Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Advanced Braking.
Diversification Opportunities for BHP Group and Advanced Braking
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between BHP and Advanced is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec 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 Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of BHP Group i.e., BHP Group and Advanced Braking go up and down completely randomly.
Pair Corralation between BHP Group and Advanced Braking
Assuming the 90 days trading horizon BHP Group is expected to generate 31.73 times less return on investment than Advanced Braking. But when comparing it to its historical volatility, BHP Group Limited is 2.24 times less risky than Advanced Braking. It trades about 0.01 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3.90 in Advanced Braking Technology on August 31, 2024 and sell it today you would earn a total of 4.20 from holding Advanced Braking Technology or generate 107.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Advanced Braking Technology
Performance |
| Timeline |
| BHP Group Limited |
| Advanced Braking Tec |
BHP Group and Advanced Braking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Advanced Braking
The main advantage of trading using opposite BHP Group and Advanced Braking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Advanced Braking 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 Advanced Braking will offset losses from the drop in Advanced Braking's long position.| BHP Group vs. Future Generation Global | BHP Group vs. Rubicon Water | BHP Group vs. Kinatico | BHP Group vs. Jade Gas Holdings |
| Advanced Braking vs. Clime Investment Management | Advanced Braking vs. Sonic Healthcare | Advanced Braking vs. Event Hospitality and | Advanced Braking vs. Singular Health Group |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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