Correlation Between BHPA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both BHPA and Dow Jones 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 BHPA and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHPA Inc and Dow Jones Industrial, you can compare the effects of market volatilities on BHPA and Dow Jones 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 BHPA with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHPA and Dow Jones.
Diversification Opportunities for BHPA and Dow Jones
Modest diversification
The 3 months correlation between BHPA and Dow is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BHPA Inc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and BHPA 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 BHPA Inc are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of BHPA i.e., BHPA and Dow Jones go up and down completely randomly.
Pair Corralation between BHPA and Dow Jones
Given the investment horizon of 90 days BHPA Inc is not expected to generate positive returns. Moreover, BHPA is 28.47 times more volatile than Dow Jones Industrial. It trades away all of its potential returns to assume current level of volatility. Dow Jones Industrial is currently generating about 0.29 per unit of risk. If you would invest 4,273,213 in Dow Jones Industrial on November 4, 2024 and sell it today you would earn a total of 181,253 from holding Dow Jones Industrial or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHPA Inc vs. Dow Jones Industrial
Performance |
| Timeline |
BHPA and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
BHPA Inc
Pair trading matchups for BHPA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with BHPA and Dow Jones
The main advantage of trading using opposite BHPA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHPA position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.The idea behind BHPA Inc and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. Rambler Metals and | Dow Jones vs. Nicola Mining | Dow Jones vs. Old Dominion Freight | Dow Jones vs. United Guardian |
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.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |