Correlation Between BHP Group and Navigator Global

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

Diversification Opportunities for BHP Group and Navigator Global

0.21

Correlation Coefficient

BHP Group  Navigator Global

Modest diversification

The 3 months correlation between BHP and Navigator is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Navigator Global Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navigator Global Inv 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 Navigator Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navigator Global Inv has no effect on the direction of BHP Group i.e., BHP Group and Navigator Global go up and down completely randomly.

Pair Corralation between BHP Group and Navigator Global

Assuming the 90 days trading horizon BHP Group is expected to generate 5.85 times less return on investment than Navigator Global. But when comparing it to its historical volatility, BHP Group Limited is 2.55 times less risky than Navigator Global. It trades about 0.02 of its potential returns per unit of risk. Navigator Global Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Navigator Global Investments on December 27, 2024 and sell it today you would earn a total of  14.00  from holding Navigator Global Investments or generate 8.24% 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.  Navigator Global Investments

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.

Navigator Global Inv

Risk-Adjusted Performance

Insignificant

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

Pair Trading with BHP Group and Navigator Global

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

The idea behind BHP Group Limited and Navigator Global Investments 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.