Correlation Between BHP Group and Anglo American
Can any of the company-specific risk be diversified away by investing in both BHP Group and Anglo American 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 Anglo American 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 Anglo American PLC, you can compare the effects of market volatilities on BHP Group and Anglo American 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 Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Anglo American.
Diversification Opportunities for BHP Group and Anglo American
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BHP and Anglo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Anglo American PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American PLC has no effect on the direction of BHP Group i.e., BHP Group and Anglo American go up and down completely randomly.
Pair Corralation between BHP Group and Anglo American
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Anglo American. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 1.63 times less risky than Anglo American. The stock trades about -0.02 of its potential returns per unit of risk. The Anglo American PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,156 in Anglo American PLC on August 28, 2024 and sell it today you would earn a total of 330.00 from holding Anglo American PLC or generate 28.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.52% |
| Values | Daily Returns |
BHP Group Limited vs. Anglo American PLC
Performance |
| Timeline |
| BHP Group Limited |
| Anglo American PLC |
BHP Group and Anglo American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Anglo American
The main advantage of trading using opposite BHP Group and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American'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 |
| Anglo American vs. BHP Group Limited | Anglo American vs. Avarone Metals | Anglo American vs. Huntsman Exploration | Anglo American vs. Aurelia Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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