Correlation Between National Australia and BHP Group
Can any of the company-specific risk be diversified away by investing in both National Australia 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 National Australia and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Australia Bank and BHP Group Limited, you can compare the effects of market volatilities on National Australia 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 National Australia with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and BHP Group.
Diversification Opportunities for National Australia and BHP Group
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and BHP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank 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 National Australia 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 National Australia Bank 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 National Australia i.e., National Australia and BHP Group go up and down completely randomly.
Pair Corralation between National Australia and BHP Group
Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.21 times more return on investment than BHP Group. However, National Australia Bank is 4.75 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 -0.29 per unit of risk. If you would invest 10,431 in National Australia Bank on August 29, 2024 and sell it today you would earn a total of 28.00 from holding National Australia Bank or generate 0.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. BHP Group Limited
Performance |
| Timeline |
| National Australia Bank |
| BHP Group Limited |
National Australia and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and BHP Group
The main advantage of trading using opposite National Australia and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia 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.| National Australia vs. Singular Health Group | National Australia vs. Kingsrose Mining | National Australia vs. Macquarie Technology Group | National Australia vs. Ora Banda Mining |
| BHP Group vs. Singular Health Group | BHP Group vs. Ras Technology Holdings | BHP Group vs. Apiam Animal Health | BHP Group vs. Richmond Vanadium Technology |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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