Correlation Between BHP Group and Global Health

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

Diversification Opportunities for BHP Group and Global Health

-0.07

Correlation Coefficient

BHP Group  Global Health

Good diversification

The 3 months correlation between BHP and Global is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of BHP Group i.e., BHP Group and Global Health go up and down completely randomly.

Pair Corralation between BHP Group and Global Health

Assuming the 90 days trading horizon BHP Group is expected to generate 4.63 times less return on investment than Global Health. But when comparing it to its historical volatility, BHP Group Limited is 3.4 times less risky than Global Health. It trades about 0.08 of its potential returns per unit of risk. Global Health is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Global Health on November 19, 2024 and sell it today you would earn a total of  1.00  from holding Global Health or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

BHP Group Limited  vs.  Global Health

BHP Group Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BHP Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Global Health

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Global Health may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with BHP Group and Global Health

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

The idea behind BHP Group Limited and Global Health 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.