Correlation Between BHP Group and Nickel Mines
Can any of the company-specific risk be diversified away by investing in both BHP Group and Nickel Mines 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 Nickel Mines 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 Nickel Mines Limited, you can compare the effects of market volatilities on BHP Group and Nickel Mines 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 Nickel Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Nickel Mines.
Diversification Opportunities for BHP Group and Nickel Mines
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Nickel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited 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 Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of BHP Group i.e., BHP Group and Nickel Mines go up and down completely randomly.
Pair Corralation between BHP Group and Nickel Mines
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Nickel Mines. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 2.88 times less risky than Nickel Mines. The stock trades about 0.0 of its potential returns per unit of risk. The Nickel Mines Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Nickel Mines Limited on August 26, 2024 and sell it today you would earn a total of 15.00 from holding Nickel Mines Limited or generate 34.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Nickel Mines Limited
Performance |
| Timeline |
| BHP Group Limited |
| Nickel Mines Limited |
BHP Group and Nickel Mines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Nickel Mines
The main advantage of trading using opposite BHP Group and Nickel Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Nickel Mines 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 Nickel Mines will offset losses from the drop in Nickel Mines' 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 |
| Nickel Mines vs. Norra Metals Corp | Nickel Mines vs. ZincX Resources Corp | Nickel Mines vs. Nuinsco Resources Limited | Nickel Mines vs. Mundoro Capital |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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