Correlation Between BHP Group and Leeuwin Metals
Can any of the company-specific risk be diversified away by investing in both BHP Group and Leeuwin 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 Leeuwin 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 Leeuwin Metals, you can compare the effects of market volatilities on BHP Group and Leeuwin 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 Leeuwin Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Leeuwin Metals.
Diversification Opportunities for BHP Group and Leeuwin Metals
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BHP and Leeuwin is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin 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 Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of BHP Group i.e., BHP Group and Leeuwin Metals go up and down completely randomly.
Pair Corralation between BHP Group and Leeuwin Metals
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Leeuwin Metals. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 5.29 times less risky than Leeuwin Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Leeuwin Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8.55 in Leeuwin Metals on November 3, 2024 and sell it today you would earn a total of 3.45 from holding Leeuwin Metals or generate 40.35% 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. Leeuwin Metals
Performance |
| Timeline |
| BHP Group Limited |
| Leeuwin Metals |
BHP Group and Leeuwin Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Leeuwin Metals
The main advantage of trading using opposite BHP Group and Leeuwin Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Leeuwin 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 Leeuwin Metals will offset losses from the drop in Leeuwin Metals' long position.| BHP Group vs. Auctus Alternative Investments | BHP Group vs. Oneview Healthcare PLC | BHP Group vs. A1 Investments Resources | BHP Group vs. Carlton Investments |
| Leeuwin Metals vs. Australian Unity Office | Leeuwin Metals vs. Macquarie Technology Group | Leeuwin Metals vs. Clime Investment Management | Leeuwin Metals vs. Cleanaway Waste Management |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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