Correlation Between BHP Group and Stelar Metals
Can any of the company-specific risk be diversified away by investing in both BHP Group and Stelar 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 Stelar 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 Stelar Metals, you can compare the effects of market volatilities on BHP Group and Stelar 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 Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Stelar Metals.
Diversification Opportunities for BHP Group and Stelar Metals
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between BHP and Stelar is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar 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 Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of BHP Group i.e., BHP Group and Stelar Metals go up and down completely randomly.
Pair Corralation between BHP Group and Stelar Metals
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.67 times more return on investment than Stelar Metals. However, BHP Group Limited is 1.49 times less risky than Stelar Metals. It trades about -0.19 of its potential returns per unit of risk. Stelar Metals is currently generating about -0.15 per unit of risk. If you would invest 4,260 in BHP Group Limited on September 3, 2024 and sell it today you would lose (203.00) from holding BHP Group Limited or give up 4.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Stelar Metals
Performance |
| Timeline |
| BHP Group Limited |
| Stelar Metals |
BHP Group and Stelar Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Stelar Metals
The main advantage of trading using opposite BHP Group and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Stelar 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 Stelar Metals will offset losses from the drop in Stelar Metals' long position.| BHP Group vs. Stelar Metals | BHP Group vs. Alternative Investment Trust | BHP Group vs. Strickland Metals | BHP Group vs. Group 6 Metals |
| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. Aneka Tambang Tbk |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |