Correlation Between BHP Group and Transition Metals
Can any of the company-specific risk be diversified away by investing in both BHP Group and Transition Metals 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 Transition Metals 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 Transition Metals Corp, you can compare the effects of market volatilities on BHP Group and Transition Metals 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 Transition Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Transition Metals.
Diversification Opportunities for BHP Group and Transition Metals
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BHP and Transition is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Transition Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transition Metals Corp 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 Transition Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transition Metals Corp has no effect on the direction of BHP Group i.e., BHP Group and Transition Metals go up and down completely randomly.
Pair Corralation between BHP Group and Transition Metals
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Transition Metals. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 6.09 times less risky than Transition Metals. The stock trades about -0.2 of its potential returns per unit of risk. The Transition Metals Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4.90 in Transition Metals Corp on October 31, 2024 and sell it today you would lose (1.80) from holding Transition Metals Corp or give up 36.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.47% |
| Values | Daily Returns |
BHP Group Limited vs. Transition Metals Corp
Performance |
| Timeline |
| BHP Group Limited |
| Transition Metals Corp |
BHP Group and Transition Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Transition Metals
The main advantage of trading using opposite BHP Group and Transition Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Transition Metals 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 Transition Metals will offset losses from the drop in Transition Metals' 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 |
| Transition Metals vs. Golden Lake Exploration | Transition Metals vs. Vendetta Mining Corp | Transition Metals vs. Bayhorse Silver | Transition Metals vs. Commerce Resources Corp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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