Correlation Between BHP Group and Environmental
Can any of the company-specific risk be diversified away by investing in both BHP Group and Environmental 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 Environmental 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 The Environmental Group, you can compare the effects of market volatilities on BHP Group and Environmental 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 Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Environmental.
Diversification Opportunities for BHP Group and Environmental
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BHP and Environmental is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental 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 Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of BHP Group i.e., BHP Group and Environmental go up and down completely randomly.
Pair Corralation between BHP Group and Environmental
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.49 times more return on investment than Environmental. However, BHP Group Limited is 2.04 times less risky than Environmental. It trades about -0.03 of its potential returns per unit of risk. The Environmental Group is currently generating about -0.03 per unit of risk. If you would invest 4,305 in BHP Group Limited on September 2, 2024 and sell it today you would lose (248.00) from holding BHP Group Limited or give up 5.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. The Environmental Group
Performance |
| Timeline |
| BHP Group Limited |
| The Environmental |
BHP Group and Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Environmental
The main advantage of trading using opposite BHP Group and Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Environmental 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 Environmental will offset losses from the drop in Environmental'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 |
| Environmental vs. Aneka Tambang Tbk | Environmental vs. BHP Group Limited | Environmental vs. Rio Tinto | Environmental vs. Macquarie Group Ltd |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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