Correlation Between BHP Group and BTC Health
Can any of the company-specific risk be diversified away by investing in both BHP Group and BTC Health 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 BTC Health 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 BTC Health Limited, you can compare the effects of market volatilities on BHP Group and BTC Health 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 BTC Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and BTC Health.
Diversification Opportunities for BHP Group and BTC Health
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BHP and BTC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and BTC Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTC Health 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 BTC Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTC Health Limited has no effect on the direction of BHP Group i.e., BHP Group and BTC Health go up and down completely randomly.
Pair Corralation between BHP Group and BTC Health
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.25 times more return on investment than BTC Health. However, BHP Group Limited is 4.08 times less risky than BTC Health. It trades about -0.19 of its potential returns per unit of risk. BTC Health Limited is currently generating about -0.11 per unit of risk. If you would invest 4,225 in BHP Group Limited on August 25, 2024 and sell it today you would lose (209.00) from holding BHP Group Limited or give up 4.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BHP Group Limited vs. BTC Health Limited
Performance |
| Timeline |
| BHP Group Limited |
| BTC Health Limited |
BHP Group and BTC Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and BTC Health
The main advantage of trading using opposite BHP Group and BTC Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, BTC Health 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 BTC Health will offset losses from the drop in BTC Health's long position.| BHP Group vs. Super Retail Group | BHP Group vs. Eagle Mountain Mining | BHP Group vs. Wt Financial Group | BHP Group vs. Pioneer Credit |
| BTC Health vs. Aneka Tambang Tbk | BTC Health vs. Rio Tinto | BTC Health vs. BHP Group Limited | BTC Health vs. Block Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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