Correlation Between BHP Group and Hastings Technology

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

Diversification Opportunities for BHP Group and Hastings Technology

0.32

Correlation Coefficient

BHP Group  Hastings Technology

Weak diversification

The 3 months correlation between BHP and Hastings is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Hastings Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hastings Technology 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 Hastings Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hastings Technology has no effect on the direction of BHP Group i.e., BHP Group and Hastings Technology go up and down completely randomly.

Pair Corralation between BHP Group and Hastings Technology

Assuming the 90 days horizon BHP Group is expected to generate 3.43 times less return on investment than Hastings Technology. But when comparing it to its historical volatility, BHP Group Limited is 4.06 times less risky than Hastings Technology. It trades about 0.01 of its potential returns per unit of risk. Hastings Technology Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Hastings Technology Metals on December 29, 2024 and sell it today you would lose (1.00) from holding Hastings Technology Metals or give up 5.56% of portfolio value over 90 days.

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

BHP Group Limited  vs.  Hastings Technology Metals

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. Despite nearly stable basic indicators, BHP Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hastings Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hastings Technology Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hastings Technology is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BHP Group and Hastings Technology

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

The idea behind BHP Group Limited and Hastings Technology Metals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.