Correlation Between BHP Group and Northern Dynasty
Can any of the company-specific risk be diversified away by investing in both BHP Group and Northern Dynasty 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 Northern Dynasty 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 Northern Dynasty Minerals, you can compare the effects of market volatilities on BHP Group and Northern Dynasty 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 Northern Dynasty. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Northern Dynasty.
Diversification Opportunities for BHP Group and Northern Dynasty
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BHP and Northern is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Northern Dynasty Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Dynasty Minerals 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 Northern Dynasty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Dynasty Minerals has no effect on the direction of BHP Group i.e., BHP Group and Northern Dynasty go up and down completely randomly.
Pair Corralation between BHP Group and Northern Dynasty
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Northern Dynasty. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 3.92 times less risky than Northern Dynasty. The stock trades about -0.26 of its potential returns per unit of risk. The Northern Dynasty Minerals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Northern Dynasty Minerals on August 30, 2024 and sell it today you would earn a total of 1.00 from holding Northern Dynasty Minerals or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Northern Dynasty Minerals
Performance |
| Timeline |
| BHP Group Limited |
| Northern Dynasty Minerals |
BHP Group and Northern Dynasty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Northern Dynasty
The main advantage of trading using opposite BHP Group and Northern Dynasty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Northern Dynasty 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 Northern Dynasty will offset losses from the drop in Northern Dynasty'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 |
| Northern Dynasty vs. Vizsla Resources Corp | Northern Dynasty vs. Western Copper and | Northern Dynasty vs. Americas Silver Corp | Northern Dynasty vs. EMX Royalty 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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