Correlation Between BHP Group and Microequities Asset

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

Diversification Opportunities for BHP Group and Microequities Asset

0.24

Correlation Coefficient

BHP Group  Microequities Asset

Modest diversification

The 3 months correlation between BHP and Microequities is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Microequities Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microequities Asset 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 Microequities Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microequities Asset has no effect on the direction of BHP Group i.e., BHP Group and Microequities Asset go up and down completely randomly.

Pair Corralation between BHP Group and Microequities Asset

Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.65 times more return on investment than Microequities Asset. However, BHP Group Limited is 1.53 times less risky than Microequities Asset. It trades about 0.09 of its potential returns per unit of risk. Microequities Asset Management is currently generating about 0.01 per unit of risk. If you would invest  3,881  in BHP Group Limited on September 12, 2024 and sell it today you would earn a total of  302.00  from holding BHP Group Limited or generate 7.78% return on investment over 90 days.

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

BHP Group Limited  vs.  Microequities Asset Management

BHP Group Limited

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BHP Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Microequities Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microequities Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Microequities Asset is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BHP Group and Microequities Asset

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

The idea behind BHP Group Limited and Microequities Asset Management 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 Commodity Directory module to find actively traded commodities issued by global exchanges.