Correlation Between BHP Group and Retail Food
Can any of the company-specific risk be diversified away by investing in both BHP Group and Retail Food 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 Retail Food 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 Retail Food Group, you can compare the effects of market volatilities on BHP Group and Retail Food 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 Retail Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Retail Food.
Diversification Opportunities for BHP Group and Retail Food
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BHP and Retail is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Retail Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Food Group 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 Retail Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Food Group has no effect on the direction of BHP Group i.e., BHP Group and Retail Food go up and down completely randomly.
Pair Corralation between BHP Group and Retail Food
Assuming the 90 days trading horizon BHP Group is expected to generate 2.01 times less return on investment than Retail Food. But when comparing it to its historical volatility, BHP Group Limited is 2.32 times less risky than Retail Food. It trades about 0.04 of its potential returns per unit of risk. Retail Food Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 284.00 in Retail Food Group on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Retail Food Group or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Retail Food Group
Performance |
| Timeline |
| BHP Group Limited |
| Retail Food Group |
BHP Group and Retail Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Retail Food
The main advantage of trading using opposite BHP Group and Retail Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Retail Food 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 Retail Food will offset losses from the drop in Retail Food'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 |
| Retail Food vs. Nine Entertainment Co | Retail Food vs. Aurelia Metals | Retail Food vs. ACDC Metals | Retail Food vs. Dexus Convenience Retail |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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