Correlation Between KRISPY KREME and BHP Group

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

By analyzing existing cross correlation between KRISPY KREME DL 01 and BHP Group Limited, you can compare the effects of market volatilities on KRISPY KREME 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 KRISPY KREME with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and BHP Group.

Diversification Opportunities for KRISPY KREME and BHP Group

-0.37

Correlation Coefficient

KRISPY KREME  BHP Group

Very good diversification

The 3 months correlation between KRISPY and BHP is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 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 KRISPY KREME 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 KRISPY KREME DL 01 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 KRISPY KREME i.e., KRISPY KREME and BHP Group go up and down completely randomly.

Pair Corralation between KRISPY KREME and BHP Group

Assuming the 90 days horizon KRISPY KREME is expected to generate 2.12 times less return on investment than BHP Group. In addition to that, KRISPY KREME is 1.38 times more volatile than BHP Group Limited. It trades about 0.03 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.09 per unit of volatility. If you would invest  2,262  in BHP Group Limited on September 3, 2024 and sell it today you would earn a total of  238.00  from holding BHP Group Limited or generate 10.52% return on investment over 90 days.

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

KRISPY KREME DL 01  vs.  BHP Group Limited

KRISPY KREME DL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KRISPY KREME DL 01 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BHP Group Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BHP Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KRISPY KREME and BHP Group

The main advantage of trading using opposite KRISPY KREME and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRISPY KREME 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 KRISPY KREME DL 01 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.

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