Correlation Between BHP Group and Western Copper
Can any of the company-specific risk be diversified away by investing in both BHP Group and Western Copper 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 Western Copper 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 Western Copper and, you can compare the effects of market volatilities on BHP Group and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Western Copper.
Diversification Opportunities for BHP Group and Western Copper
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between BHP and Western is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of BHP Group i.e., BHP Group and Western Copper go up and down completely randomly.
Pair Corralation between BHP Group and Western Copper
Assuming the 90 days horizon BHP Group Limited is expected to generate 0.51 times more return on investment than Western Copper. However, BHP Group Limited is 1.97 times less risky than Western Copper. It trades about -0.2 of its potential returns per unit of risk. Western Copper and is currently generating about -0.31 per unit of risk. If you would invest 4,705 in BHP Group Limited on December 13, 2024 and sell it today you would lose (305.00) from holding BHP Group Limited or give up 6.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Western Copper and
Performance |
| Timeline |
| BHP Group Limited |
| Western Copper |
BHP Group and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Western Copper
The main advantage of trading using opposite BHP Group and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| BHP Group vs. Sixt Leasing SE | BHP Group vs. UNITED UTILITIES GR | BHP Group vs. Perdoceo Education | BHP Group vs. Platinum Investment Management |
| Western Copper vs. Heidelberg Materials AG | Western Copper vs. Plastic Omnium | Western Copper vs. NEWELL RUBBERMAID | Western Copper vs. UMC Electronics Co |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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