Correlation Between Piedmont Lithium and BHP Group
Can any of the company-specific risk be diversified away by investing in both Piedmont Lithium 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 Piedmont Lithium and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Piedmont Lithium Ltd and BHP Group Limited, you can compare the effects of market volatilities on Piedmont Lithium 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 Piedmont Lithium with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piedmont Lithium and BHP Group.
Diversification Opportunities for Piedmont Lithium and BHP Group
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Piedmont and BHP is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium 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 Piedmont Lithium 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 Piedmont Lithium 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 Piedmont Lithium i.e., Piedmont Lithium and BHP Group go up and down completely randomly.
Pair Corralation between Piedmont Lithium and BHP Group
Considering the 90-day investment horizon Piedmont Lithium Ltd is expected to under-perform the BHP Group. In addition to that, Piedmont Lithium is 3.28 times more volatile than BHP Group Limited. It trades about -0.05 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.0 per unit of volatility. If you would invest 5,339 in BHP Group Limited on August 27, 2024 and sell it today you would lose (103.00) from holding BHP Group Limited or give up 1.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Piedmont Lithium Ltd vs. BHP Group Limited
Performance |
| Timeline |
| Piedmont Lithium |
| BHP Group Limited |
Piedmont Lithium and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Piedmont Lithium and BHP Group
The main advantage of trading using opposite Piedmont Lithium and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piedmont Lithium 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.| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
| BHP Group vs. Vale SA ADR | BHP Group vs. Teck Resources Ltd | BHP Group vs. Lithium Americas Corp | BHP Group vs. MP Materials Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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