Correlation Between BHP Group and Magellan Financial

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

Diversification Opportunities for BHP Group and Magellan Financial

-0.19

Correlation Coefficient

BHP Group  Magellan Financial

Good diversification

The 3 months correlation between BHP and Magellan is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Magellan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Financial 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 Magellan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Financial has no effect on the direction of BHP Group i.e., BHP Group and Magellan Financial go up and down completely randomly.

Pair Corralation between BHP Group and Magellan Financial

Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.41 times more return on investment than Magellan Financial. However, BHP Group Limited is 2.47 times less risky than Magellan Financial. It trades about 0.02 of its potential returns per unit of risk. Magellan Financial Group is currently generating about -0.16 per unit of risk. If you would invest  3,910  in BHP Group Limited on December 22, 2024 and sell it today you would earn a total of  44.00  from holding BHP Group Limited or generate 1.13% 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.  Magellan Financial Group

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.

Magellan Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magellan Financial Group 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 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 Magellan Financial

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

The idea behind BHP Group Limited and Magellan Financial Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.