Correlation Between BHP Group and European Metals
Can any of the company-specific risk be diversified away by investing in both BHP Group and European 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 European 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 European Metals Holdings, you can compare the effects of market volatilities on BHP Group and European 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and European Metals.
Diversification Opportunities for BHP Group and European Metals
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BHP and European is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of BHP Group i.e., BHP Group and European Metals go up and down completely randomly.
Pair Corralation between BHP Group and European Metals
Assuming the 90 days horizon BHP Group Limited is expected to generate 0.94 times more return on investment than European Metals. However, BHP Group Limited is 1.07 times less risky than European Metals. It trades about 0.01 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.06 per unit of risk. If you would invest 2,754 in BHP Group Limited on November 3, 2024 and sell it today you would lose (317.00) from holding BHP Group Limited or give up 11.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
BHP Group Limited vs. European Metals Holdings
Performance |
| Timeline |
| BHP Group Limited |
| European Metals Holdings |
BHP Group and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and European Metals
The main advantage of trading using opposite BHP Group and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, European 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 European Metals will offset losses from the drop in European Metals' long position.| BHP Group vs. Anglo American PLC | BHP Group vs. Avarone Metals | BHP Group vs. Huntsman Exploration | BHP Group vs. Aurelia Metals Limited |
| European Metals vs. Ardea Resources Limited | European Metals vs. Alpha Lithium | European Metals vs. Piedmont Lithium | European Metals vs. Critical Elements |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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