Correlation Between BHP Group and Macquarie

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

Diversification Opportunities for BHP Group and Macquarie

-0.02

Correlation Coefficient

BHP Group  Macquarie

Good diversification

The 3 months correlation between BHP and Macquarie is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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 Macquarie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of BHP Group i.e., BHP Group and Macquarie go up and down completely randomly.

Pair Corralation between BHP Group and Macquarie

Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Macquarie. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 1.06 times less risky than Macquarie. The stock trades about -0.05 of its potential returns per unit of risk. The Macquarie Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  23,091  in Macquarie Group on December 1, 2024 and sell it today you would lose (432.00) from holding Macquarie Group or give up 1.87% of portfolio value over 90 days.

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

BHP Group Limited  vs.  Macquarie Group

BHP Group Limited

Risk-Adjusted Performance

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 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.

Macquarie Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Macquarie 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 Macquarie

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

The idea behind BHP Group Limited and Macquarie 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.