Correlation Between BHP Group and Ecora Resources
Can any of the company-specific risk be diversified away by investing in both BHP Group and Ecora Resources 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 Ecora Resources 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 Ecora Resources PLC, you can compare the effects of market volatilities on BHP Group and Ecora Resources 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 Ecora Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Ecora Resources.
Diversification Opportunities for BHP Group and Ecora Resources
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Ecora is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Ecora Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecora Resources 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 Ecora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecora Resources PLC has no effect on the direction of BHP Group i.e., BHP Group and Ecora Resources go up and down completely randomly.
Pair Corralation between BHP Group and Ecora Resources
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Ecora Resources. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 2.82 times less risky than Ecora Resources. The stock trades about -0.27 of its potential returns per unit of risk. The Ecora Resources PLC is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 97.00 in Ecora Resources PLC on August 30, 2024 and sell it today you would lose (16.00) from holding Ecora Resources PLC or give up 16.49% 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. Ecora Resources PLC
Performance |
| Timeline |
| BHP Group Limited |
| Ecora Resources PLC |
BHP Group and Ecora Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Ecora Resources
The main advantage of trading using opposite BHP Group and Ecora Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Ecora Resources 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 Ecora Resources will offset losses from the drop in Ecora Resources' long position.| BHP Group vs. Vale SA ADR | BHP Group vs. Teck Resources Ltd | BHP Group vs. Lithium Americas Corp | BHP Group vs. MP Materials Corp |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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