Correlation Between Prosafe SE and BHP Group

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

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

Diversification Opportunities for Prosafe SE and BHP Group

0.28

Correlation Coefficient

Prosafe SE  BHP Group

Modest diversification

The 3 months correlation between Prosafe and BHP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Prosafe SE 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 Prosafe SE 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 Prosafe SE 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 Prosafe SE i.e., Prosafe SE and BHP Group go up and down completely randomly.

Pair Corralation between Prosafe SE and BHP Group

Assuming the 90 days horizon Prosafe SE is expected to generate 14.38 times more return on investment than BHP Group. However, Prosafe SE is 14.38 times more volatile than BHP Group Limited. It trades about 0.07 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.03 per unit of risk. If you would invest  54.00  in Prosafe SE on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Prosafe SE or generate 9.26% return on investment over 90 days.

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

Prosafe SE  vs.  BHP Group Limited

Prosafe SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prosafe SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosafe SE reported solid returns over the last few months and may actually be approaching a breakup point.

BHP Group Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BHP Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prosafe SE and BHP Group

The main advantage of trading using opposite Prosafe SE and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosafe SE 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.

The idea behind Prosafe SE and BHP Group Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.