Correlation Between BHP Group and FPX Nickel

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

Diversification Opportunities for BHP Group and FPX Nickel

0.89

Correlation Coefficient

BHP Group  FPX Nickel

Very poor diversification

The 3 months correlation between BHP and FPX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and FPX Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPX Nickel 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 FPX Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPX Nickel Corp has no effect on the direction of BHP Group i.e., BHP Group and FPX Nickel go up and down completely randomly.

Pair Corralation between BHP Group and FPX Nickel

Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the FPX Nickel. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 3.2 times less risky than FPX Nickel. The stock trades about -0.56 of its potential returns per unit of risk. The FPX Nickel Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  18.00  in FPX Nickel Corp on October 9, 2024 and sell it today you would lose (1.00) from holding FPX Nickel Corp or give up 5.56% of portfolio value over 90 days.

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

BHP Group Limited  vs.  FPX Nickel Corp

BHP Group Limited

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

FPX Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FPX Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BHP Group and FPX Nickel

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

The idea behind BHP Group Limited and FPX Nickel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.