Correlation Between Treasury Wine and BHP Group
Can any of the company-specific risk be diversified away by investing in both Treasury Wine 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 Treasury Wine and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Treasury Wine Estates and BHP Group Limited, you can compare the effects of market volatilities on Treasury Wine 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 Treasury Wine with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and BHP Group.
Diversification Opportunities for Treasury Wine and BHP Group
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Treasury and BHP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates 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 Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and BHP Group go up and down completely randomly.
Pair Corralation between Treasury Wine and BHP Group
Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the BHP Group. In addition to that, Treasury Wine is 1.11 times more volatile than BHP Group Limited. It trades about -0.26 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.05 per unit of volatility. If you would invest 2,367 in BHP Group Limited on October 26, 2024 and sell it today you would earn a total of 25.00 from holding BHP Group Limited or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Treasury Wine Estates vs. BHP Group Limited
Performance |
| Timeline |
| Treasury Wine Estates |
| BHP Group Limited |
Treasury Wine and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Treasury Wine and BHP Group
The main advantage of trading using opposite Treasury Wine and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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.| Treasury Wine vs. Tianjin Capital Environmental | Treasury Wine vs. BlueScope Steel Limited | Treasury Wine vs. Grupo Carso SAB | Treasury Wine vs. Olympic Steel |
| BHP Group vs. SAFEROADS HLDGS | BHP Group vs. Texas Roadhouse | BHP Group vs. Clean Energy Fuels | BHP Group vs. Treasury Wine Estates |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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