Correlation Between BHP Group and Environmental Clean

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

Diversification Opportunities for BHP Group and Environmental Clean

-0.28

Correlation Coefficient

BHP Group  Environmental Clean

Very good diversification

The 3 months correlation between BHP and Environmental is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Environmental Clean Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Environmental Clean 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 Environmental Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Environmental Clean has no effect on the direction of BHP Group i.e., BHP Group and Environmental Clean go up and down completely randomly.

Pair Corralation between BHP Group and Environmental Clean

Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Environmental Clean. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 13.83 times less risky than Environmental Clean. The stock trades about -0.21 of its potential returns per unit of risk. The Environmental Clean Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Environmental Clean Technologies on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Environmental Clean Technologies or generate 0.0% return on investment over 90 days.

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

BHP Group Limited  vs.  Environmental Clean Technologi

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Environmental Clean

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Environmental Clean Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Environmental Clean unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Environmental Clean

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

The idea behind BHP Group Limited and Environmental Clean Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.