Correlation Between BHP Group and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both BHP Group and Gamma Communications 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 Gamma Communications 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 Gamma Communications PLC, you can compare the effects of market volatilities on BHP Group and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Gamma Communications.
Diversification Opportunities for BHP Group and Gamma Communications
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BHP and Gamma is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of BHP Group i.e., BHP Group and Gamma Communications go up and down completely randomly.
Pair Corralation between BHP Group and Gamma Communications
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.52 times more return on investment than Gamma Communications. However, BHP Group Limited is 1.94 times less risky than Gamma Communications. It trades about 0.39 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about -0.48 per unit of risk. If you would invest 196,300 in BHP Group Limited on October 23, 2024 and sell it today you would earn a total of 12,300 from holding BHP Group Limited or generate 6.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
BHP Group Limited vs. Gamma Communications PLC
Performance |
| Timeline |
| BHP Group Limited |
| Gamma Communications PLC |
BHP Group and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Gamma Communications
The main advantage of trading using opposite BHP Group and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| BHP Group vs. Edita Food Industries | BHP Group vs. Associated British Foods | BHP Group vs. Molson Coors Beverage | BHP Group vs. Liberty Media Corp |
| Gamma Communications vs. AMG Advanced Metallurgical | Gamma Communications vs. Check Point Software | Gamma Communications vs. Blackrock World Mining | Gamma Communications vs. Adriatic 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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