Correlation Between Iluka Resources and BHP Group
Can any of the company-specific risk be diversified away by investing in both Iluka Resources 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 Iluka Resources and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iluka Resources Ltd and BHP Group Limited, you can compare the effects of market volatilities on Iluka Resources 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 Iluka Resources with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iluka Resources and BHP Group.
Diversification Opportunities for Iluka Resources and BHP Group
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iluka and BHP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Iluka Resources Ltd 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 Iluka Resources 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 Iluka Resources Ltd 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 Iluka Resources i.e., Iluka Resources and BHP Group go up and down completely randomly.
Pair Corralation between Iluka Resources and BHP Group
Assuming the 90 days horizon Iluka Resources Ltd is expected to under-perform the BHP Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Iluka Resources Ltd is 1.74 times less risky than BHP Group. The pink sheet trades about -0.34 of its potential returns per unit of risk. The BHP Group Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,765 in BHP Group Limited on September 1, 2024 and sell it today you would lose (115.00) from holding BHP Group Limited or give up 4.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iluka Resources Ltd vs. BHP Group Limited
Performance |
| Timeline |
| Iluka Resources |
| BHP Group Limited |
Iluka Resources and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iluka Resources and BHP Group
The main advantage of trading using opposite Iluka Resources and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iluka Resources 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.| Iluka Resources vs. ERAMET SA | Iluka Resources vs. Giyani Metals Corp | Iluka Resources vs. IGO Limited | Iluka Resources vs. Grid Metals Corp |
| BHP Group vs. Anglo American PLC | BHP Group vs. Avarone Metals | BHP Group vs. Huntsman Exploration | BHP Group vs. Aurelia Metals Limited |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |