Correlation Between BHP Group and Pampa Energia
Can any of the company-specific risk be diversified away by investing in both BHP Group and Pampa Energia 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 Pampa Energia 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 Pampa Energia SA, you can compare the effects of market volatilities on BHP Group and Pampa Energia 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 Pampa Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Pampa Energia.
Diversification Opportunities for BHP Group and Pampa Energia
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BHP and Pampa is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA 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 Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of BHP Group i.e., BHP Group and Pampa Energia go up and down completely randomly.
Pair Corralation between BHP Group and Pampa Energia
Assuming the 90 days trading horizon BHP Group is expected to generate 2.23 times less return on investment than Pampa Energia. But when comparing it to its historical volatility, BHP Group Limited is 1.25 times less risky than Pampa Energia. It trades about 0.09 of its potential returns per unit of risk. Pampa Energia SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 47,840 in Pampa Energia SA on August 27, 2024 and sell it today you would earn a total of 325,160 from holding Pampa Energia SA or generate 679.68% 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. Pampa Energia SA
Performance |
| Timeline |
| BHP Group Limited |
| Pampa Energia SA |
BHP Group and Pampa Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Pampa Energia
The main advantage of trading using opposite BHP Group and Pampa Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Pampa Energia 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 Pampa Energia will offset losses from the drop in Pampa Energia's long position.The idea behind BHP Group Limited and Pampa Energia SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Pampa Energia vs. United States Steel | Pampa Energia vs. Pfizer Inc | Pampa Energia vs. Distribuidora de Gas | Pampa Energia vs. IRSA Propiedades Comerciales |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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