Correlation Between BHP Group and Greentech Metals
Can any of the company-specific risk be diversified away by investing in both BHP Group and Greentech Metals 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 Greentech Metals 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 Greentech Metals, you can compare the effects of market volatilities on BHP Group and Greentech Metals 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 Greentech Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Greentech Metals.
Diversification Opportunities for BHP Group and Greentech Metals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Greentech is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Greentech Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greentech Metals 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 Greentech Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greentech Metals has no effect on the direction of BHP Group i.e., BHP Group and Greentech Metals go up and down completely randomly.
Pair Corralation between BHP Group and Greentech Metals
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.16 times more return on investment than Greentech Metals. However, BHP Group Limited is 6.44 times less risky than Greentech Metals. It trades about -0.27 of its potential returns per unit of risk. Greentech Metals is currently generating about -0.15 per unit of risk. If you would invest 4,296 in BHP Group Limited on August 28, 2024 and sell it today you would lose (276.00) from holding BHP Group Limited or give up 6.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Greentech Metals
Performance |
| Timeline |
| BHP Group Limited |
| Greentech Metals |
BHP Group and Greentech Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Greentech Metals
The main advantage of trading using opposite BHP Group and Greentech Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Greentech Metals 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 Greentech Metals will offset losses from the drop in Greentech Metals' long position.| BHP Group vs. Saferoads Holdings | BHP Group vs. Aussie Broadband | BHP Group vs. WiseTech Global Limited | BHP Group vs. Mach7 Technologies |
| Greentech Metals vs. Northern Star Resources | Greentech Metals vs. Evolution Mining | Greentech Metals vs. Bluescope Steel | Greentech Metals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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