Correlation Between BHP Group and Americas Silver

Can any of the company-specific risk be diversified away by investing in both BHP Group and Americas Silver 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 BHP Group and Americas Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BHP Group Limited and Americas Silver Corp, you can compare the effects of market volatilities on BHP Group and Americas Silver 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 BHP Group with a short position of Americas Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Americas Silver.

Diversification Opportunities for BHP Group and Americas Silver

0.46

Correlation Coefficient

BHP Group  Americas Silver

Very weak diversification

The 3 months correlation between BHP and Americas is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Americas Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Silver Corp and BHP Group 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 BHP Group Limited are associated (or correlated) with Americas Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Silver Corp has no effect on the direction of BHP Group i.e., BHP Group and Americas Silver go up and down completely randomly.

Pair Corralation between BHP Group and Americas Silver

Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.31 times more return on investment than Americas Silver. However, BHP Group Limited is 3.24 times less risky than Americas Silver. It trades about -0.14 of its potential returns per unit of risk. Americas Silver Corp is currently generating about -0.33 per unit of risk. If you would invest  5,960  in BHP Group Limited on March 29, 2024 and sell it today you would lose (227.00) from holding BHP Group Limited or give up 3.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BHP Group Limited  vs.  Americas Silver Corp

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, BHP Group is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Americas Silver Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Americas Silver Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Americas Silver unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Americas Silver

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

The idea behind BHP Group Limited and Americas Silver Corp 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.