Correlation Between IShares Global and BHP Group
Can any of the company-specific risk be diversified away by investing in both IShares Global 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 IShares Global and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Healthcare and BHP Group Limited, you can compare the effects of market volatilities on IShares Global 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 IShares Global with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and BHP Group.
Diversification Opportunities for IShares Global and BHP Group
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and BHP is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare 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 IShares Global 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 iShares Global Healthcare 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 IShares Global i.e., IShares Global and BHP Group go up and down completely randomly.
Pair Corralation between IShares Global and BHP Group
Assuming the 90 days trading horizon iShares Global Healthcare is expected to generate 0.57 times more return on investment than BHP Group. However, iShares Global Healthcare is 1.76 times less risky than BHP Group. It trades about 0.05 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.01 per unit of risk. If you would invest 12,525 in iShares Global Healthcare on December 4, 2024 and sell it today you would earn a total of 2,387 from holding iShares Global Healthcare or generate 19.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
iShares Global Healthcare vs. BHP Group Limited
Performance |
| Timeline |
| iShares Global Healthcare |
| BHP Group Limited |
IShares Global and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and BHP Group
The main advantage of trading using opposite IShares Global and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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.| IShares Global vs. iShares MSCI Emerging | ||
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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