Correlation Between BHP Group and Glencore PLC
Can any of the company-specific risk be diversified away by investing in both BHP Group and Glencore PLC 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 Glencore PLC 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 Glencore PLC ADR, you can compare the effects of market volatilities on BHP Group and Glencore PLC 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 Glencore PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Glencore PLC.
Diversification Opportunities for BHP Group and Glencore PLC
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BHP and Glencore is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Glencore PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC ADR 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 Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC ADR has no effect on the direction of BHP Group i.e., BHP Group and Glencore PLC go up and down completely randomly.
Pair Corralation between BHP Group and Glencore PLC
Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.83 times more return on investment than Glencore PLC. However, BHP Group Limited is 1.21 times less risky than Glencore PLC. It trades about 0.0 of its potential returns per unit of risk. Glencore PLC ADR is currently generating about -0.01 per unit of risk. If you would invest 5,624 in BHP Group Limited on August 27, 2024 and sell it today you would lose (388.00) from holding BHP Group Limited or give up 6.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Glencore PLC ADR
Performance |
| Timeline |
| BHP Group Limited |
| Glencore PLC ADR |
BHP Group and Glencore PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Glencore PLC
The main advantage of trading using opposite BHP Group and Glencore PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Glencore PLC 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 Glencore PLC will offset losses from the drop in Glencore PLC'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 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |