Correlation Between BHP Group and Teck Resources
Can any of the company-specific risk be diversified away by investing in both BHP Group and Teck 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 Teck 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 Teck Resources Ltd, you can compare the effects of market volatilities on BHP Group and Teck 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 Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Teck Resources.
Diversification Opportunities for BHP Group and Teck Resources
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Teck is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Teck Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck 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 Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of BHP Group i.e., BHP Group and Teck Resources go up and down completely randomly.
Pair Corralation between BHP Group and Teck Resources
Assuming the 90 days horizon BHP Group Limited is expected to under-perform the Teck Resources. In addition to that, BHP Group is 2.2 times more volatile than Teck Resources Ltd. It trades about -0.02 of its total potential returns per unit of risk. Teck Resources Ltd is currently generating about 0.02 per unit of volatility. If you would invest 4,649 in Teck Resources Ltd on September 1, 2024 and sell it today you would earn a total of 19.00 from holding Teck Resources Ltd or generate 0.41% 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. Teck Resources Ltd
Performance |
| Timeline |
| BHP Group Limited |
| Teck Resources |
BHP Group and Teck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Teck Resources
The main advantage of trading using opposite BHP Group and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Teck 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 Teck Resources will offset losses from the drop in Teck Resources' long position.| BHP Group vs. Anglo American PLC | BHP Group vs. Avarone Metals | BHP Group vs. Huntsman Exploration | BHP Group vs. Aurelia Metals Limited |
| Teck Resources vs. Rio Tinto ADR | Teck Resources vs. Vale SA ADR | Teck Resources vs. MP Materials Corp | Teck Resources vs. Lithium Americas 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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