Correlation Between BHP Group and Sayona Mining

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

Diversification Opportunities for BHP Group and Sayona Mining

0.66

Correlation Coefficient

BHP Group  Sayona Mining

Poor diversification

The 3 months correlation between BHP and Sayona is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Sayona Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sayona Mining Limited 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 Sayona Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sayona Mining Limited has no effect on the direction of BHP Group i.e., BHP Group and Sayona Mining go up and down completely randomly.

Pair Corralation between BHP Group and Sayona Mining

Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.19 times more return on investment than Sayona Mining. However, BHP Group Limited is 5.23 times less risky than Sayona Mining. It trades about -0.04 of its potential returns per unit of risk. Sayona Mining Limited is currently generating about -0.07 per unit of risk. If you would invest  5,265  in BHP Group Limited on November 29, 2024 and sell it today you would lose (195.00) from holding BHP Group Limited or give up 3.7% of portfolio value over 90 days.

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

BHP Group Limited  vs.  Sayona Mining Limited

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.

Sayona Mining Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sayona Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BHP Group and Sayona Mining

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

The idea behind BHP Group Limited and Sayona Mining Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.