Correlation Between BHP Group and EROAD
Can any of the company-specific risk be diversified away by investing in both BHP Group and EROAD 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 EROAD 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 EROAD, you can compare the effects of market volatilities on BHP Group and EROAD 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 EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and EROAD.
Diversification Opportunities for BHP Group and EROAD
Very good diversification
The 3 months correlation between BHP and EROAD is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of BHP Group i.e., BHP Group and EROAD go up and down completely randomly.
Pair Corralation between BHP Group and EROAD
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the EROAD. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 1.91 times less risky than EROAD. The stock trades about -0.3 of its potential returns per unit of risk. The EROAD is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 79.00 in EROAD on August 29, 2024 and sell it today you would earn a total of 5.00 from holding EROAD or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. EROAD
Performance |
| Timeline |
| BHP Group Limited |
| EROAD |
BHP Group and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and EROAD
The main advantage of trading using opposite BHP Group and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.| BHP Group vs. Clime Investment Management | BHP Group vs. Mach7 Technologies | BHP Group vs. Air New Zealand | BHP Group vs. K2 Asset Management |
| EROAD vs. Navigator Global Investments | EROAD vs. Super Retail Group | EROAD vs. Regal Investment | EROAD vs. Australian United Investment |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |