Correlation Between BHP Group and Talisman Mining
Can any of the company-specific risk be diversified away by investing in both BHP Group and Talisman Mining 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 Talisman Mining 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 Talisman Mining, you can compare the effects of market volatilities on BHP Group and Talisman Mining 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 Talisman Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Talisman Mining.
Diversification Opportunities for BHP Group and Talisman Mining
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Talisman is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Talisman Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talisman Mining 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 Talisman Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talisman Mining has no effect on the direction of BHP Group i.e., BHP Group and Talisman Mining go up and down completely randomly.
Pair Corralation between BHP Group and Talisman Mining
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.32 times more return on investment than Talisman Mining. However, BHP Group Limited is 3.13 times less risky than Talisman Mining. It trades about 0.0 of its potential returns per unit of risk. Talisman Mining is currently generating about -0.18 per unit of risk. If you would invest 3,996 in BHP Group Limited on November 3, 2024 and sell it today you would lose (1.00) from holding BHP Group Limited or give up 0.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Talisman Mining
Performance |
| Timeline |
| BHP Group Limited |
| Talisman Mining |
BHP Group and Talisman Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Talisman Mining
The main advantage of trading using opposite BHP Group and Talisman Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Talisman Mining 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 Talisman Mining will offset losses from the drop in Talisman Mining's long position.| BHP Group vs. Auctus Alternative Investments | BHP Group vs. Oneview Healthcare PLC | BHP Group vs. A1 Investments Resources | BHP Group vs. Carlton Investments |
| Talisman Mining vs. Legacy Iron Ore | Talisman Mining vs. Bisalloy Steel Group | Talisman Mining vs. Queste Communications | Talisman Mining vs. Charter Hall 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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