Correlation Between BHP Group and Platinum Asia
Can any of the company-specific risk be diversified away by investing in both BHP Group and Platinum Asia 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 Platinum Asia 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 Platinum Asia Investments, you can compare the effects of market volatilities on BHP Group and Platinum Asia 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 Platinum Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Platinum Asia.
Diversification Opportunities for BHP Group and Platinum Asia
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BHP and Platinum is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Platinum Asia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia Investments 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 Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia Investments has no effect on the direction of BHP Group i.e., BHP Group and Platinum Asia go up and down completely randomly.
Pair Corralation between BHP Group and Platinum Asia
Assuming the 90 days trading horizon BHP Group is expected to generate 5.09 times less return on investment than Platinum Asia. In addition to that, BHP Group is 1.06 times more volatile than Platinum Asia Investments. It trades about 0.01 of its total potential returns per unit of risk. Platinum Asia Investments is currently generating about 0.04 per unit of volatility. If you would invest 80.00 in Platinum Asia Investments on September 12, 2024 and sell it today you would earn a total of 21.00 from holding Platinum Asia Investments or generate 26.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Platinum Asia Investments
Performance |
| Timeline |
| BHP Group Limited |
| Platinum Asia Investments |
BHP Group and Platinum Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Platinum Asia
The main advantage of trading using opposite BHP Group and Platinum Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Platinum Asia 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 Platinum Asia will offset losses from the drop in Platinum Asia'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 |
| Platinum Asia vs. Aneka Tambang Tbk | Platinum Asia vs. Commonwealth Bank | Platinum Asia vs. BHP Group Limited | Platinum Asia vs. Rio Tinto |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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