Correlation Between Pilbara Minerals and BHP Group
Can any of the company-specific risk be diversified away by investing in both Pilbara Minerals 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 Pilbara Minerals and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pilbara Minerals and BHP Group Limited, you can compare the effects of market volatilities on Pilbara Minerals 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 Pilbara Minerals with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pilbara Minerals and BHP Group.
Diversification Opportunities for Pilbara Minerals and BHP Group
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pilbara and BHP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals 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 Pilbara Minerals 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 Pilbara Minerals 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 Pilbara Minerals i.e., Pilbara Minerals and BHP Group go up and down completely randomly.
Pair Corralation between Pilbara Minerals and BHP Group
Assuming the 90 days trading horizon Pilbara Minerals is expected to under-perform the BHP Group. In addition to that, Pilbara Minerals is 2.32 times more volatile than BHP Group Limited. It trades about -0.1 of its total potential returns per unit of risk. BHP Group Limited is currently generating about -0.03 per unit of volatility. If you would invest 4,355 in BHP Group Limited on August 31, 2024 and sell it today you would lose (298.00) from holding BHP Group Limited or give up 6.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pilbara Minerals vs. BHP Group Limited
Performance |
| Timeline |
| Pilbara Minerals |
| BHP Group Limited |
Pilbara Minerals and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pilbara Minerals and BHP Group
The main advantage of trading using opposite Pilbara Minerals and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pilbara Minerals 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.| Pilbara Minerals vs. National Storage REIT | Pilbara Minerals vs. Lendlease Group | Pilbara Minerals vs. Phoslock Environmental Technologies | Pilbara Minerals vs. ABACUS STORAGE KING |
| BHP Group vs. Future Generation Global | BHP Group vs. Rubicon Water | BHP Group vs. Kinatico | BHP Group vs. Jade Gas Holdings |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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