Correlation Between Peak Resources and BHP Group
Can any of the company-specific risk be diversified away by investing in both Peak 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 Peak 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 Peak Resources Limited and BHP Group Limited, you can compare the effects of market volatilities on Peak 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 Peak Resources with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peak Resources and BHP Group.
Diversification Opportunities for Peak Resources and BHP Group
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Peak and BHP is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Peak Resources Limited 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 Peak 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 Peak Resources Limited 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 Peak Resources i.e., Peak Resources and BHP Group go up and down completely randomly.
Pair Corralation between Peak Resources and BHP Group
Assuming the 90 days horizon Peak Resources Limited is expected to generate 7.12 times more return on investment than BHP Group. However, Peak Resources is 7.12 times more volatile than BHP Group Limited. It trades about 0.15 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.05 per unit of risk. If you would invest 5.90 in Peak Resources Limited on November 3, 2024 and sell it today you would earn a total of 1.35 from holding Peak Resources Limited or generate 22.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Peak Resources Limited vs. BHP Group Limited
Performance |
| Timeline |
| Peak Resources |
| BHP Group Limited |
Peak Resources and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Peak Resources and BHP Group
The main advantage of trading using opposite Peak Resources and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peak 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.| Peak Resources vs. ScanSource | Peak Resources vs. OURGAME INTHOLDL 00005 | Peak Resources vs. Media and Games | Peak Resources vs. BJs Wholesale Club |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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