Correlation Between BHP Group and Filo Mining

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

Diversification Opportunities for BHP Group and Filo Mining

-0.45

Correlation Coefficient

BHP Group  Filo Mining

Very good diversification

The 3 months correlation between BHP and Filo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Filo Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filo Mining 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 Filo Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filo Mining Corp has no effect on the direction of BHP Group i.e., BHP Group and Filo Mining go up and down completely randomly.

Pair Corralation between BHP Group and Filo Mining

Considering the 90-day investment horizon BHP Group Limited is expected to generate 1.64 times more return on investment than Filo Mining. However, BHP Group is 1.64 times more volatile than Filo Mining Corp. It trades about 0.04 of its potential returns per unit of risk. Filo Mining Corp is currently generating about 0.0 per unit of risk. If you would invest  4,838  in BHP Group Limited on December 26, 2024 and sell it today you would earn a total of  144.00  from holding BHP Group Limited or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.23%
Values	Daily Returns

BHP Group Limited  vs.  Filo Mining Corp

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.

Filo Mining Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BHP Group and Filo Mining

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

The idea behind BHP Group Limited and Filo Mining 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.