Correlation Between BHP Group and Boss Resources

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

Diversification Opportunities for BHP Group and Boss Resources

0.19

Correlation Coefficient

BHP Group  Boss Resources

Average diversification

The 3 months correlation between BHP and Boss is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Boss Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boss Resources 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 Boss Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boss Resources has no effect on the direction of BHP Group i.e., BHP Group and Boss Resources go up and down completely randomly.

Pair Corralation between BHP Group and Boss Resources

Considering the 90-day investment horizon BHP Group is expected to generate 5.71 times less return on investment than Boss Resources. But when comparing it to its historical volatility, BHP Group Limited is 3.63 times less risky than Boss Resources. It trades about 0.05 of its potential returns per unit of risk. Boss Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Boss Resources on December 27, 2024 and sell it today you would earn a total of  24.00  from holding Boss Resources or generate 16.22% return on investment over 90 days.

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

BHP Group Limited  vs.  Boss Resources

BHP Group Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Boss Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boss Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Boss Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Boss Resources

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

The idea behind BHP Group Limited and Boss Resources 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.