Correlation Between BHP Group and Australian Vanadium
Can any of the company-specific risk be diversified away by investing in both BHP Group and Australian Vanadium 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 Australian Vanadium 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 Australian Vanadium Limited, you can compare the effects of market volatilities on BHP Group and Australian Vanadium 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 Australian Vanadium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Australian Vanadium.
Diversification Opportunities for BHP Group and Australian Vanadium
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BHP and Australian is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Australian Vanadium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Vanadium 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 Australian Vanadium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Vanadium has no effect on the direction of BHP Group i.e., BHP Group and Australian Vanadium go up and down completely randomly.
Pair Corralation between BHP Group and Australian Vanadium
Assuming the 90 days horizon BHP Group Limited is expected to under-perform the Australian Vanadium. But the pink sheet apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 1.8 times less risky than Australian Vanadium. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Australian Vanadium Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.72 in Australian Vanadium Limited on August 29, 2024 and sell it today you would earn a total of 0.19 from holding Australian Vanadium Limited or generate 26.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BHP Group Limited vs. Australian Vanadium Limited
Performance |
| Timeline |
| BHP Group Limited |
| Australian Vanadium |
BHP Group and Australian Vanadium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Australian Vanadium
The main advantage of trading using opposite BHP Group and Australian Vanadium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Australian Vanadium 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 Australian Vanadium will offset losses from the drop in Australian Vanadium's long position.| BHP Group vs. Anglo American PLC | BHP Group vs. Avarone Metals | BHP Group vs. Huntsman Exploration | BHP Group vs. Aurelia Metals Limited |
| Australian Vanadium vs. Rockridge Resources | Australian Vanadium vs. Ameriwest Lithium | Australian Vanadium vs. Osisko Metals Incorporated | Australian Vanadium vs. Volt Lithium 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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