Correlation Between BHP Group and Electra Battery
Can any of the company-specific risk be diversified away by investing in both BHP Group and Electra Battery 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 Electra Battery 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 Electra Battery Materials, you can compare the effects of market volatilities on BHP Group and Electra Battery 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 Electra Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Electra Battery.
Diversification Opportunities for BHP Group and Electra Battery
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between BHP and Electra is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Electra Battery Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Battery Materials 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 Electra Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Battery Materials has no effect on the direction of BHP Group i.e., BHP Group and Electra Battery go up and down completely randomly.
Pair Corralation between BHP Group and Electra Battery
Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.25 times more return on investment than Electra Battery. However, BHP Group Limited is 4.04 times less risky than Electra Battery. It trades about 0.0 of its potential returns per unit of risk. Electra Battery Materials is currently generating about -0.01 per unit of risk. If you would invest 5,735 in BHP Group Limited on August 30, 2024 and sell it today you would lose (555.00) from holding BHP Group Limited or give up 9.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
BHP Group Limited vs. Electra Battery Materials
Performance |
| Timeline |
| BHP Group Limited |
| Electra Battery Materials |
BHP Group and Electra Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Electra Battery
The main advantage of trading using opposite BHP Group and Electra Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Electra Battery 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 Electra Battery will offset losses from the drop in Electra Battery's 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 |
| Electra Battery vs. Cobalt Blue Holdings | Electra Battery vs. Bradda Head Lithium | Electra Battery vs. ioneer | Electra Battery vs. Tearlach Resources Limited |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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