Correlation Between BHP Group and Compania
Can any of the company-specific risk be diversified away by investing in both BHP Group and Compania 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 Compania 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 Compania de Transporte, you can compare the effects of market volatilities on BHP Group and Compania 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 Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Compania.
Diversification Opportunities for BHP Group and Compania
Excellent diversification
The 3 months correlation between BHP and Compania is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of BHP Group i.e., BHP Group and Compania go up and down completely randomly.
Pair Corralation between BHP Group and Compania
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Compania. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 1.52 times less risky than Compania. The stock trades about 0.0 of its potential returns per unit of risk. The Compania de Transporte is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 109,150 in Compania de Transporte on August 27, 2024 and sell it today you would earn a total of 105,350 from holding Compania de Transporte or generate 96.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Compania de Transporte
Performance |
| Timeline |
| BHP Group Limited |
| Compania de Transporte |
BHP Group and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Compania
The main advantage of trading using opposite BHP Group and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.The idea behind BHP Group Limited and Compania de Transporte 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.| Compania vs. United States Steel | Compania vs. Pfizer Inc | Compania vs. Distribuidora de Gas | Compania 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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |