Correlation Between BHP Group and Peak Resources
Can any of the company-specific risk be diversified away by investing in both BHP Group and Peak 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 Peak 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 Peak Resources Limited, you can compare the effects of market volatilities on BHP Group and Peak 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 Peak Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Peak Resources.
Diversification Opportunities for BHP Group and Peak Resources
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BHP and Peak is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak 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 Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of BHP Group i.e., BHP Group and Peak Resources go up and down completely randomly.
Pair Corralation between BHP Group and Peak Resources
Assuming the 90 days trading horizon BHP Group is expected to generate 11.83 times less return on investment than Peak Resources. But when comparing it to its historical volatility, BHP Group Limited is 7.42 times less risky than Peak Resources. It trades about 0.06 of its potential returns per unit of risk. Peak Resources Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5.80 in Peak Resources Limited on September 12, 2024 and sell it today you would earn a total of 0.70 from holding Peak Resources Limited or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Peak Resources Limited
Performance |
| Timeline |
| BHP Group Limited |
| Peak Resources |
BHP Group and Peak Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Peak Resources
The main advantage of trading using opposite BHP Group and Peak Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Peak 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 Peak Resources will offset losses from the drop in Peak Resources' long position.| BHP Group vs. National Retail Properties | BHP Group vs. Strategic Education | BHP Group vs. Vastned Retail NV | BHP Group vs. EEDUCATION ALBERT AB |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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