Correlation Between BHP Group and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both BHP Group and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank Ltd, you can compare the effects of market volatilities on BHP Group and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Macquarie Bank.
Diversification Opportunities for BHP Group and Macquarie Bank
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BHP and Macquarie is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of BHP Group i.e., BHP Group and Macquarie Bank go up and down completely randomly.
Pair Corralation between BHP Group and Macquarie Bank
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 12.56 times more return on investment than Macquarie Bank. However, BHP Group is 12.56 times more volatile than Macquarie Bank Ltd. It trades about 0.14 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.2 per unit of risk. If you would invest 3,948 in BHP Group Limited on November 27, 2024 and sell it today you would earn a total of 132.00 from holding BHP Group Limited or generate 3.34% 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. Macquarie Bank Ltd
Performance |
| Timeline |
| BHP Group Limited |
| Macquarie Bank |
BHP Group and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Macquarie Bank
The main advantage of trading using opposite BHP Group and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.| BHP Group vs. Charter Hall Education | BHP Group vs. Charter Hall Retail | BHP Group vs. Epsilon Healthcare | BHP Group vs. Duxton Broadacre Farms |
| Macquarie Bank vs. Qbe Insurance Group | Macquarie Bank vs. ARN Media Limited | Macquarie Bank vs. Dug Technology | Macquarie Bank vs. Beston Global Food |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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