Correlation Between BHP Group and Voltage Metals

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

Diversification Opportunities for BHP Group and Voltage Metals

0.24

Correlation Coefficient

BHP Group  Voltage Metals

Modest diversification

The 3 months correlation between BHP and Voltage is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Voltage Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voltage Metals 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 Voltage Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voltage Metals Corp has no effect on the direction of BHP Group i.e., BHP Group and Voltage Metals go up and down completely randomly.

Pair Corralation between BHP Group and Voltage Metals

Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.16 times more return on investment than Voltage Metals. However, BHP Group Limited is 6.38 times less risky than Voltage Metals. It trades about -0.13 of its potential returns per unit of risk. Voltage Metals Corp is currently generating about -0.12 per unit of risk. If you would invest  5,616  in BHP Group Limited on October 24, 2024 and sell it today you would lose (607.00) from holding BHP Group Limited or give up 10.81% of portfolio value over 90 days.

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

BHP Group Limited  vs.  Voltage Metals 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 latest unsteady performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Voltage Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voltage Metals Corp 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 primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BHP Group and Voltage Metals

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

The idea behind BHP Group Limited and Voltage Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.