Correlation Between BHP Group and Cardno
Can any of the company-specific risk be diversified away by investing in both BHP Group and Cardno 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 Cardno 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 Cardno, you can compare the effects of market volatilities on BHP Group and Cardno 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 Cardno. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Cardno.
Diversification Opportunities for BHP Group and Cardno
Very weak diversification
The 3 months correlation between BHP and Cardno is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Cardno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardno 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 Cardno. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardno has no effect on the direction of BHP Group i.e., BHP Group and Cardno go up and down completely randomly.
Pair Corralation between BHP Group and Cardno
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Cardno. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 7.43 times less risky than Cardno. The stock trades about -0.1 of its potential returns per unit of risk. The Cardno is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 33.00 in Cardno on September 26, 2024 and sell it today you would lose (10.00) from holding Cardno or give up 30.3% 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. Cardno
Performance |
Timeline |
BHP Group Limited |
Cardno |
BHP Group and Cardno Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BHP Group and Cardno
The main advantage of trading using opposite BHP Group and Cardno positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Cardno 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 Cardno will offset losses from the drop in Cardno's long position.BHP Group vs. Northern Star Resources | BHP Group vs. Evolution Mining | BHP Group vs. Bluescope Steel | BHP Group vs. Aneka Tambang Tbk |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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