Correlation Between BHP Group and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both BHP Group and Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank of, you can compare the effects of market volatilities on BHP Group and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Commonwealth Bank.
Diversification Opportunities for BHP Group and Commonwealth Bank
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between BHP and Commonwealth is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of BHP Group i.e., BHP Group and Commonwealth Bank go up and down completely randomly.
Pair Corralation between BHP Group and Commonwealth Bank
Assuming the 90 days trading horizon BHP Group is expected to generate 7.77 times less return on investment than Commonwealth Bank. In addition to that, BHP Group is 4.25 times more volatile than Commonwealth Bank of. It trades about 0.0 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.1 per unit of volatility. If you would invest 9,397 in Commonwealth Bank of on September 1, 2024 and sell it today you would earn a total of 1,123 from holding Commonwealth Bank of or generate 11.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
BHP Group Limited vs. Commonwealth Bank of
Performance |
| Timeline |
| BHP Group Limited |
| Commonwealth Bank |
BHP Group and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Commonwealth Bank
The main advantage of trading using opposite BHP Group and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank'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 Transaction History module to view history of all your transactions and understand their impact on performance.
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