Correlation Between BHP Group and Granite Creek

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

Diversification Opportunities for BHP Group and Granite Creek

0.64

Correlation Coefficient

BHP Group  Granite Creek

Poor diversification

The 3 months correlation between BHP and Granite is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Granite Creek Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Creek Copper 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 Granite Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Creek Copper has no effect on the direction of BHP Group i.e., BHP Group and Granite Creek go up and down completely randomly.

Pair Corralation between BHP Group and Granite Creek

Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Granite Creek. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 15.56 times less risky than Granite Creek. The stock trades about -0.24 of its potential returns per unit of risk. The Granite Creek Copper is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.19  in Granite Creek Copper on October 4, 2024 and sell it today you would earn a total of  0.24  from holding Granite Creek Copper or generate 20.17% return on investment over 90 days.

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

BHP Group Limited  vs.  Granite Creek Copper

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.

Granite Creek Copper

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Creek Copper are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Granite Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Granite Creek

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

The idea behind BHP Group Limited and Granite Creek Copper 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.

Check out your portfolio center.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.