Correlation Between BHP Group and Silver Elephant
Can any of the company-specific risk be diversified away by investing in both BHP Group and Silver Elephant 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 Silver Elephant 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 Silver Elephant Mining, you can compare the effects of market volatilities on BHP Group and Silver Elephant 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 Silver Elephant. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Silver Elephant.
Diversification Opportunities for BHP Group and Silver Elephant
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Silver is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Silver Elephant Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Elephant Mining 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 Silver Elephant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Elephant Mining has no effect on the direction of BHP Group i.e., BHP Group and Silver Elephant go up and down completely randomly.
Pair Corralation between BHP Group and Silver Elephant
Assuming the 90 days horizon BHP Group is expected to generate 6.32 times less return on investment than Silver Elephant. But when comparing it to its historical volatility, BHP Group Limited is 2.07 times less risky than Silver Elephant. It trades about 0.01 of its potential returns per unit of risk. Silver Elephant Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 34.00 in Silver Elephant Mining on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Silver Elephant Mining or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Silver Elephant Mining
Performance |
| Timeline |
| BHP Group Limited |
| Silver Elephant Mining |
BHP Group and Silver Elephant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Silver Elephant
The main advantage of trading using opposite BHP Group and Silver Elephant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Silver Elephant 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 Silver Elephant will offset losses from the drop in Silver Elephant'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 |
| Silver Elephant vs. ATT Inc | Silver Elephant vs. Merck Company | Silver Elephant vs. Walt Disney | Silver Elephant vs. Caterpillar |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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