Correlation Between BH Macro and Rockhopper Exploration

Can any of the company-specific risk be diversified away by investing in both BH Macro and Rockhopper Exploration 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 BH Macro and Rockhopper Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BH Macro Limited and Rockhopper Exploration, you can compare the effects of market volatilities on BH Macro and Rockhopper Exploration 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 BH Macro with a short position of Rockhopper Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of BH Macro and Rockhopper Exploration.

Diversification Opportunities for BH Macro and Rockhopper Exploration

-0.29

Correlation Coefficient

BH Macro  Rockhopper Exploration

Very good diversification

The 3 months correlation between BHMG and Rockhopper is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BH Macro Limited and Rockhopper Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockhopper Exploration and BH Macro 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 BH Macro Limited are associated (or correlated) with Rockhopper Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockhopper Exploration has no effect on the direction of BH Macro i.e., BH Macro and Rockhopper Exploration go up and down completely randomly.

Pair Corralation between BH Macro and Rockhopper Exploration

Assuming the 90 days trading horizon BH Macro Limited is expected to generate 0.61 times more return on investment than Rockhopper Exploration. However, BH Macro Limited is 1.63 times less risky than Rockhopper Exploration. It trades about 0.14 of its potential returns per unit of risk. Rockhopper Exploration is currently generating about -0.09 per unit of risk. If you would invest  34,500  in BH Macro Limited on February 17, 2024 and sell it today you would earn a total of  750.00  from holding BH Macro Limited or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

BH Macro Limited  vs.  Rockhopper Exploration

BH Macro Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BH Macro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BH Macro is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Rockhopper Exploration

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rockhopper Exploration are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Rockhopper Exploration exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BH Macro and Rockhopper Exploration

The main advantage of trading using opposite BH Macro and Rockhopper Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BH Macro position performs unexpectedly, Rockhopper Exploration 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 Rockhopper Exploration will offset losses from the drop in Rockhopper Exploration's long position.

The idea behind BH Macro Limited and Rockhopper Exploration pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.