Correlation Between BHP Group and Mineral Res
Can any of the company-specific risk be diversified away by investing in both BHP Group and Mineral Res 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 Mineral Res 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 Mineral Res, you can compare the effects of market volatilities on BHP Group and Mineral Res 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 Mineral Res. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Mineral Res.
Diversification Opportunities for BHP Group and Mineral Res
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BHP and Mineral is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Mineral Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Res 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 Mineral Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Res has no effect on the direction of BHP Group i.e., BHP Group and Mineral Res go up and down completely randomly.
Pair Corralation between BHP Group and Mineral Res
Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.37 times more return on investment than Mineral Res. However, BHP Group Limited is 2.72 times less risky than Mineral Res. It trades about -0.14 of its potential returns per unit of risk. Mineral Res is currently generating about -0.13 per unit of risk. If you would invest 5,546 in BHP Group Limited on September 1, 2024 and sell it today you would lose (281.00) from holding BHP Group Limited or give up 5.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Mineral Res
Performance |
| Timeline |
| BHP Group Limited |
| Mineral Res |
BHP Group and Mineral Res Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Mineral Res
The main advantage of trading using opposite BHP Group and Mineral Res positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Mineral Res 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 Mineral Res will offset losses from the drop in Mineral Res' 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 |
| Mineral Res vs. IGO Limited | Mineral Res vs. Grid Metals Corp | Mineral Res vs. First American Silver | Mineral Res vs. Qubec Nickel 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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