Correlation Between CHAMPION IRON and BHP Group
Can any of the company-specific risk be diversified away by investing in both CHAMPION IRON 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 CHAMPION IRON and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHAMPION IRON and BHP Group Limited, you can compare the effects of market volatilities on CHAMPION IRON 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 CHAMPION IRON with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHAMPION IRON and BHP Group.
Diversification Opportunities for CHAMPION IRON and BHP Group
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CHAMPION and BHP is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CHAMPION IRON 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 CHAMPION IRON 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 CHAMPION IRON 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 CHAMPION IRON i.e., CHAMPION IRON and BHP Group go up and down completely randomly.
Pair Corralation between CHAMPION IRON and BHP Group
Assuming the 90 days trading horizon CHAMPION IRON is expected to under-perform the BHP Group. In addition to that, CHAMPION IRON is 2.55 times more volatile than BHP Group Limited. It trades about -0.13 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.07 per unit of volatility. If you would invest 2,342 in BHP Group Limited on November 5, 2024 and sell it today you would earn a total of 35.00 from holding BHP Group Limited or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHAMPION IRON vs. BHP Group Limited
Performance |
| Timeline |
| CHAMPION IRON |
| BHP Group Limited |
CHAMPION IRON and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHAMPION IRON and BHP Group
The main advantage of trading using opposite CHAMPION IRON and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHAMPION IRON 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.| CHAMPION IRON vs. Air Transport Services | CHAMPION IRON vs. AEON METALS LTD | CHAMPION IRON vs. Fortescue Metals Group | CHAMPION IRON vs. GREENX METALS LTD |
| BHP Group vs. Lifeway Foods | BHP Group vs. PLAYWAY SA ZY 10 | BHP Group vs. ePlay Digital | BHP Group vs. TreeHouse Foods |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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