Correlation Between Australia and BHP Group
Can any of the company-specific risk be diversified away by investing in both Australia 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 Australia and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australia and New and BHP Group Limited, you can compare the effects of market volatilities on Australia 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 Australia with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australia and BHP Group.
Diversification Opportunities for Australia and BHP Group
Good diversification
The 3 months correlation between Australia and BHP is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Australia and New 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 Australia 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 Australia and New 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 Australia i.e., Australia and BHP Group go up and down completely randomly.
Pair Corralation between Australia and BHP Group
Assuming the 90 days trading horizon Australia and New is expected to generate 0.83 times more return on investment than BHP Group. However, Australia and New is 1.21 times less risky than BHP Group. It trades about 0.07 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.05 per unit of risk. If you would invest 2,797 in Australia and New on April 7, 2024 and sell it today you would earn a total of 68.00 from holding Australia and New or generate 2.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Australia and New vs. BHP Group Limited
Performance |
Timeline |
Australia and New |
BHP Group Limited |
Australia and BHP Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Australia and BHP Group
The main advantage of trading using opposite Australia and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australia 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.Australia vs. Accent Resources NL | Australia vs. Hutchison Telecommunications | Australia vs. GO2 People | Australia vs. Pact Group Holdings |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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