Correlation Between Group 6 and BHP Group
Can any of the company-specific risk be diversified away by investing in both Group 6 and BHP Group 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 Group 6 and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 6 Metals and BHP Group Limited, you can compare the effects of market volatilities on Group 6 and BHP Group 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 Group 6 with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 6 and BHP Group.
Diversification Opportunities for Group 6 and BHP Group
Good diversification
The 3 months correlation between Group and BHP is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Group 6 Metals and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Group 6 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 Group 6 Metals are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Group 6 i.e., Group 6 and BHP Group go up and down completely randomly.
Pair Corralation between Group 6 and BHP Group
Assuming the 90 days trading horizon Group 6 Metals is expected to under-perform the BHP Group. In addition to that, Group 6 is 4.84 times more volatile than BHP Group Limited. It trades about -0.04 of its total potential returns per unit of risk. BHP Group Limited is currently generating about -0.03 per unit of volatility. If you would invest 4,506 in BHP Group Limited on September 4, 2024 and sell it today you would lose (434.00) from holding BHP Group Limited or give up 9.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Group 6 Metals vs. BHP Group Limited
Performance |
| Timeline |
| Group 6 Metals |
| BHP Group Limited |
Group 6 and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 6 and BHP Group
The main advantage of trading using opposite Group 6 and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 6 position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| Group 6 vs. Northern Star Resources | Group 6 vs. Evolution Mining | Group 6 vs. Bluescope Steel | Group 6 vs. Sandfire Resources NL |
| BHP Group vs. Clime Investment Management | BHP Group vs. Lendlease Group | BHP Group vs. MFF Capital Investments | BHP Group vs. Hansen Technologies |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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