Correlation Between BHP Group and AMP
Can any of the company-specific risk be diversified away by investing in both BHP Group and AMP 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 AMP 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 AMP, you can compare the effects of market volatilities on BHP Group and AMP 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 AMP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and AMP.
Diversification Opportunities for BHP Group and AMP
Significant diversification
The 3 months correlation between BHP and AMP is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and AMP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP 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 AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP has no effect on the direction of BHP Group i.e., BHP Group and AMP go up and down completely randomly.
Pair Corralation between BHP Group and AMP
Assuming the 90 days trading horizon BHP Group is expected to generate 32.48 times less return on investment than AMP. But when comparing it to its historical volatility, BHP Group Limited is 1.66 times less risky than AMP. It trades about 0.0 of its potential returns per unit of risk. AMP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 125.00 in AMP on September 2, 2024 and sell it today you would earn a total of 31.00 from holding AMP or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. AMP
Performance |
| Timeline |
| BHP Group Limited |
| AMP |
BHP Group and AMP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and AMP
The main advantage of trading using opposite BHP Group and AMP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, AMP 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 AMP will offset losses from the drop in AMP's long position.| BHP Group vs. Charter Hall Education | BHP Group vs. Ainsworth Game Technology | BHP Group vs. RLF AgTech | BHP Group vs. Stelar Metals |
| AMP vs. Wt Financial Group | AMP vs. Perpetual Credit Income | AMP vs. Bank of Queensland | AMP vs. Srj Technologies 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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