Correlation Between BHP Group and 4Dmedical

Can any of the company-specific risk be diversified away by investing in both BHP Group and 4Dmedical 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 4Dmedical 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 4Dmedical, you can compare the effects of market volatilities on BHP Group and 4Dmedical 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 4Dmedical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and 4Dmedical.

Diversification Opportunities for BHP Group and 4Dmedical

0.8

Correlation Coefficient

BHP Group  4Dmedical

Very poor diversification

The 3 months correlation between BHP and 4Dmedical is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and 4Dmedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4Dmedical 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 4Dmedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4Dmedical has no effect on the direction of BHP Group i.e., BHP Group and 4Dmedical go up and down completely randomly.

Pair Corralation between BHP Group and 4Dmedical

Assuming the 90 days trading horizon BHP Group is expected to generate 3.9 times less return on investment than 4Dmedical. But when comparing it to its historical volatility, BHP Group Limited is 4.81 times less risky than 4Dmedical. It trades about 0.01 of its potential returns per unit of risk. 4Dmedical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  71.00  in 4Dmedical on September 30, 2024 and sell it today you would lose (25.00) from holding 4Dmedical or give up 35.21% of portfolio value over 90 days.

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

BHP Group Limited  vs.  4Dmedical

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

4Dmedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 4Dmedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BHP Group and 4Dmedical

The main advantage of trading using opposite BHP Group and 4Dmedical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, 4Dmedical 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 4Dmedical will offset losses from the drop in 4Dmedical's long position.

The idea behind BHP Group Limited and 4Dmedical 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 Stocks Directory module to find actively traded stocks across global markets.