Correlation Between BHP Group and Andean Silver
Can any of the company-specific risk be diversified away by investing in both BHP Group and Andean Silver 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 Andean Silver 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 Andean Silver Limited, you can compare the effects of market volatilities on BHP Group and Andean Silver 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 Andean Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Andean Silver.
Diversification Opportunities for BHP Group and Andean Silver
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Andean is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Andean Silver Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andean Silver 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 Andean Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andean Silver Limited has no effect on the direction of BHP Group i.e., BHP Group and Andean Silver go up and down completely randomly.
Pair Corralation between BHP Group and Andean Silver
Assuming the 90 days trading horizon BHP Group is expected to generate 404.27 times less return on investment than Andean Silver. But when comparing it to its historical volatility, BHP Group Limited is 4.28 times less risky than Andean Silver. It trades about 0.0 of its potential returns per unit of risk. Andean Silver Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Andean Silver Limited on August 29, 2024 and sell it today you would earn a total of 69.00 from holding Andean Silver Limited or generate 230.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 83.17% |
| Values | Daily Returns |
BHP Group Limited vs. Andean Silver Limited
Performance |
| Timeline |
| BHP Group Limited |
| Andean Silver Limited |
BHP Group and Andean Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Andean Silver
The main advantage of trading using opposite BHP Group and Andean Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Andean Silver 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 Andean Silver will offset losses from the drop in Andean Silver's long position.| BHP Group vs. Singular Health Group | BHP Group vs. Ras Technology Holdings | BHP Group vs. Apiam Animal Health | BHP Group vs. Richmond Vanadium Technology |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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