Correlation Between BHP Group and Traction Uranium
Can any of the company-specific risk be diversified away by investing in both BHP Group and Traction Uranium 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 Traction Uranium 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 Traction Uranium Corp, you can compare the effects of market volatilities on BHP Group and Traction Uranium 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 Traction Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Traction Uranium.
Diversification Opportunities for BHP Group and Traction Uranium
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Traction is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Traction Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traction Uranium 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 Traction Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traction Uranium Corp has no effect on the direction of BHP Group i.e., BHP Group and Traction Uranium go up and down completely randomly.
Pair Corralation between BHP Group and Traction Uranium
Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Traction Uranium. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 9.26 times less risky than Traction Uranium. The stock trades about -0.08 of its potential returns per unit of risk. The Traction Uranium Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Traction Uranium Corp on October 26, 2024 and sell it today you would lose (2.00) from holding Traction Uranium Corp or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Traction Uranium Corp
Performance |
| Timeline |
| BHP Group Limited |
| Traction Uranium Corp |
BHP Group and Traction Uranium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Traction Uranium
The main advantage of trading using opposite BHP Group and Traction Uranium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Traction Uranium 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 Traction Uranium will offset losses from the drop in Traction Uranium'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 |
| Traction Uranium vs. New Age Metals | Traction Uranium vs. York Harbour Metals | Traction Uranium vs. Silver Elephant Mining | Traction Uranium vs. First Energy Metals |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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