Correlation Between BHP Group and Scotch Creek
Can any of the company-specific risk be diversified away by investing in both BHP Group and Scotch Creek 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 Scotch Creek 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 Scotch Creek Ventures, you can compare the effects of market volatilities on BHP Group and Scotch Creek 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 Scotch Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Scotch Creek.
Diversification Opportunities for BHP Group and Scotch Creek
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Scotch is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Scotch Creek Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotch Creek Ventures 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 Scotch Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotch Creek Ventures has no effect on the direction of BHP Group i.e., BHP Group and Scotch Creek go up and down completely randomly.
Pair Corralation between BHP Group and Scotch Creek
Considering the 90-day investment horizon BHP Group is expected to generate 8.69 times less return on investment than Scotch Creek. But when comparing it to its historical volatility, BHP Group Limited is 17.17 times less risky than Scotch Creek. It trades about 0.17 of its potential returns per unit of risk. Scotch Creek Ventures is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Scotch Creek Ventures on November 9, 2024 and sell it today you would lose (0.11) from holding Scotch Creek Ventures or give up 3.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
BHP Group Limited vs. Scotch Creek Ventures
Performance |
| Timeline |
| BHP Group Limited |
| Scotch Creek Ventures |
BHP Group and Scotch Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Scotch Creek
The main advantage of trading using opposite BHP Group and Scotch Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Scotch Creek 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 Scotch Creek will offset losses from the drop in Scotch Creek'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 |
| Scotch Creek vs. Alpha Copper Corp | Scotch Creek vs. American Rare Earths | Scotch Creek vs. Placer Creek Mining | Scotch Creek vs. Ameriwest Lithium |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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