Correlation Between BHP Group and FSA
Can any of the company-specific risk be diversified away by investing in both BHP Group and FSA 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 FSA 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 FSA Group, you can compare the effects of market volatilities on BHP Group and FSA 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 FSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and FSA.
Diversification Opportunities for BHP Group and FSA
Average diversification
The 3 months correlation between BHP and FSA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and FSA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSA Group 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 FSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSA Group has no effect on the direction of BHP Group i.e., BHP Group and FSA go up and down completely randomly.
Pair Corralation between BHP Group and FSA
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.94 times more return on investment than FSA. However, BHP Group Limited is 1.06 times less risky than FSA. It trades about 0.01 of its potential returns per unit of risk. FSA Group is currently generating about -0.01 per unit of risk. If you would invest 4,142 in BHP Group Limited on September 12, 2024 and sell it today you would earn a total of 41.00 from holding BHP Group Limited or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. FSA Group
Performance |
| Timeline |
| BHP Group Limited |
| FSA Group |
BHP Group and FSA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and FSA
The main advantage of trading using opposite BHP Group and FSA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, FSA 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 FSA will offset losses from the drop in FSA's long position.| BHP Group vs. Northern Star Resources | BHP Group vs. Evolution Mining | BHP Group vs. Bluescope Steel | BHP Group vs. Sandfire Resources NL |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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