Correlation Between BHP Group and Recharge Resources
Can any of the company-specific risk be diversified away by investing in both BHP Group and Recharge 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 Recharge 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 Recharge Resources, you can compare the effects of market volatilities on BHP Group and Recharge 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 Recharge Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Recharge Resources.
Diversification Opportunities for BHP Group and Recharge Resources
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Recharge is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Recharge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recharge 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 Recharge Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recharge Resources has no effect on the direction of BHP Group i.e., BHP Group and Recharge Resources go up and down completely randomly.
Pair Corralation between BHP Group and Recharge Resources
Considering the 90-day investment horizon BHP Group is expected to generate 27.41 times less return on investment than Recharge Resources. But when comparing it to its historical volatility, BHP Group Limited is 16.3 times less risky than Recharge Resources. It trades about 0.14 of its potential returns per unit of risk. Recharge Resources is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2.20 in Recharge Resources on October 21, 2024 and sell it today you would earn a total of 1.13 from holding Recharge Resources or generate 51.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
BHP Group Limited vs. Recharge Resources
Performance |
| Timeline |
| BHP Group Limited |
| Recharge Resources |
BHP Group and Recharge Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Recharge Resources
The main advantage of trading using opposite BHP Group and Recharge Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Recharge 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 Recharge Resources will offset losses from the drop in Recharge 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 |
| Recharge Resources vs. Durango Resources | Recharge Resources vs. Avarone Metals | Recharge Resources vs. Pampa Metals | Recharge Resources vs. Sun Summit Minerals |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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