Correlation Between Teck Resources and BHP Group
Can any of the company-specific risk be diversified away by investing in both Teck Resources 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 Teck Resources and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teck Resources Ltd and BHP Group Limited, you can compare the effects of market volatilities on Teck Resources 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 Teck Resources with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and BHP Group.
Diversification Opportunities for Teck Resources and BHP Group
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Teck and BHP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources 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 Teck Resources 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 Teck Resources 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 Teck Resources i.e., Teck Resources and BHP Group go up and down completely randomly.
Pair Corralation between Teck Resources and BHP Group
Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 1.41 times more return on investment than BHP Group. However, Teck Resources is 1.41 times more volatile than BHP Group Limited. It trades about 0.03 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.0 per unit of risk. If you would invest 4,052 in Teck Resources Ltd on August 27, 2024 and sell it today you would earn a total of 629.00 from holding Teck Resources Ltd or generate 15.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Ltd vs. BHP Group Limited
Performance |
| Timeline |
| Teck Resources |
| BHP Group Limited |
Teck Resources and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and BHP Group
The main advantage of trading using opposite Teck Resources and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources 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.| Teck Resources vs. Rio Tinto ADR | Teck Resources vs. Vale SA ADR | Teck Resources vs. MP Materials Corp | Teck Resources vs. Lithium Americas Corp |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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