Correlation Between BHP Group and Alpha Copper

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

Diversification Opportunities for BHP Group and Alpha Copper

-0.23

Correlation Coefficient

BHP Group  Alpha Copper

Very good diversification

The 3 months correlation between BHP and Alpha is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Alpha Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Copper Corp 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 Alpha Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Copper Corp has no effect on the direction of BHP Group i.e., BHP Group and Alpha Copper go up and down completely randomly.

Pair Corralation between BHP Group and Alpha Copper

Considering the 90-day investment horizon BHP Group is expected to generate 9.76 times less return on investment than Alpha Copper. But when comparing it to its historical volatility, BHP Group Limited is 7.7 times less risky than Alpha Copper. It trades about 0.16 of its potential returns per unit of risk. Alpha Copper Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Alpha Copper Corp on November 29, 2024 and sell it today you would earn a total of  6.00  from holding Alpha Copper Corp or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

BHP Group Limited  vs.  Alpha Copper Corp

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. Even with relatively invariable technical indicators, BHP Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Alpha Copper Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Copper Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alpha Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Alpha Copper

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

The idea behind BHP Group Limited and Alpha Copper Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.