Correlation Between BHP Group and Medical Developments
Can any of the company-specific risk be diversified away by investing in both BHP Group and Medical Developments 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 Medical Developments 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 Medical Developments International, you can compare the effects of market volatilities on BHP Group and Medical Developments 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 Medical Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Medical Developments.
Diversification Opportunities for BHP Group and Medical Developments
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BHP and Medical is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Medical Developments Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Developments 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 Medical Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Developments has no effect on the direction of BHP Group i.e., BHP Group and Medical Developments go up and down completely randomly.
Pair Corralation between BHP Group and Medical Developments
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.31 times more return on investment than Medical Developments. However, BHP Group Limited is 3.23 times less risky than Medical Developments. It trades about 0.0 of its potential returns per unit of risk. Medical Developments International is currently generating about -0.04 per unit of risk. If you would invest 4,193 in BHP Group Limited on September 2, 2024 and sell it today you would lose (136.00) from holding BHP Group Limited or give up 3.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Medical Developments Internati
Performance |
| Timeline |
| BHP Group Limited |
| Medical Developments |
BHP Group and Medical Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Medical Developments
The main advantage of trading using opposite BHP Group and Medical Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Medical Developments 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 Medical Developments will offset losses from the drop in Medical Developments' long position.| BHP Group vs. Charter Hall Education | BHP Group vs. Ainsworth Game Technology | BHP Group vs. RLF AgTech | BHP Group vs. Stelar Metals |
| Medical Developments vs. Steamships Trading | Medical Developments vs. Carlton Investments | Medical Developments vs. Diversified United Investment | Medical Developments vs. Collins Foods |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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