Correlation Between BHP Group and Pershing Resources
Can any of the company-specific risk be diversified away by investing in both BHP Group and Pershing Resources 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 Pershing Resources 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 Pershing Resources, you can compare the effects of market volatilities on BHP Group and Pershing Resources 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 Pershing Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Pershing Resources.
Diversification Opportunities for BHP Group and Pershing Resources
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Pershing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Pershing Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Resources 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 Pershing Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Resources has no effect on the direction of BHP Group i.e., BHP Group and Pershing Resources go up and down completely randomly.
Pair Corralation between BHP Group and Pershing Resources
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Pershing Resources. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 9.36 times less risky than Pershing Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Pershing Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2.79 in Pershing Resources on November 4, 2024 and sell it today you would lose (1.17) from holding Pershing Resources or give up 41.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.64% |
| Values | Daily Returns |
BHP Group Limited vs. Pershing Resources
Performance |
| Timeline |
| BHP Group Limited |
| Pershing Resources |
BHP Group and Pershing Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Pershing Resources
The main advantage of trading using opposite BHP Group and Pershing Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Pershing Resources 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 Pershing Resources will offset losses from the drop in Pershing Resources' 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 |
| Pershing Resources vs. Bravada Gold | Pershing Resources vs. Silver Spruce Resources | Pershing Resources vs. Monitor Ventures | Pershing Resources vs. Euro Manganese |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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