Correlation Between BHP Group and Step One
Can any of the company-specific risk be diversified away by investing in both BHP Group and Step One 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 Step One 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 Step One Clothing, you can compare the effects of market volatilities on BHP Group and Step One 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 Step One. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Step One.
Diversification Opportunities for BHP Group and Step One
Weak diversification
The 3 months correlation between BHP and Step is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing 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 Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of BHP Group i.e., BHP Group and Step One go up and down completely randomly.
Pair Corralation between BHP Group and Step One
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.3 times more return on investment than Step One. However, BHP Group Limited is 3.37 times less risky than Step One. It trades about 0.13 of its potential returns per unit of risk. Step One Clothing is currently generating about -0.04 per unit of risk. If you would invest 4,090 in BHP Group Limited on September 13, 2024 and sell it today you would earn a total of 110.00 from holding BHP Group Limited or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Step One Clothing
Performance |
| Timeline |
| BHP Group Limited |
| Step One Clothing |
BHP Group and Step One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Step One
The main advantage of trading using opposite BHP Group and Step One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Step One 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 Step One will offset losses from the drop in Step One's long position.| BHP Group vs. Ramsay Health Care | BHP Group vs. Black Rock Mining | BHP Group vs. Aurelia Metals | BHP Group vs. Health and Plant |
| Step One vs. Black Rock Mining | Step One vs. Regis Healthcare | Step One vs. Dalaroo Metals | Step One vs. Stelar Metals |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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