Correlation Between BHP Group and Singular Health

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

Diversification Opportunities for BHP Group and Singular Health

-0.14

Correlation Coefficient

BHP Group  Singular Health

Good diversification

The 3 months correlation between BHP and Singular is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Singular Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singular Health 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 Singular Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singular Health Group has no effect on the direction of BHP Group i.e., BHP Group and Singular Health go up and down completely randomly.

Pair Corralation between BHP Group and Singular Health

Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Singular Health. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 5.5 times less risky than Singular Health. The stock trades about -0.18 of its potential returns per unit of risk. The Singular Health Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  8.40  in Singular Health Group on September 5, 2024 and sell it today you would earn a total of  3.60  from holding Singular Health Group or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

BHP Group Limited  vs.  Singular Health Group

BHP Group Limited

Risk-Adjusted Performance

6 of 100

Modest

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.

Singular Health Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singular Health Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Singular Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Singular Health

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

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