Correlation Between BHP Group and Calissio Resources

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

Diversification Opportunities for BHP Group and Calissio Resources

-0.01

Correlation Coefficient

BHP Group  Calissio Resources

Good diversification

The 3 months correlation between BHP and Calissio is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Calissio Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calissio Resources 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 Calissio Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calissio Resources has no effect on the direction of BHP Group i.e., BHP Group and Calissio Resources go up and down completely randomly.

Pair Corralation between BHP Group and Calissio Resources

Assuming the 90 days horizon BHP Group is expected to generate 156.96 times less return on investment than Calissio Resources. But when comparing it to its historical volatility, BHP Group Limited is 10.6 times less risky than Calissio Resources. It trades about 0.01 of its potential returns per unit of risk. Calissio Resources Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.04  in Calissio Resources Group on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Calissio Resources Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

BHP Group Limited  vs.  Calissio Resources Group

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. Despite nearly stable essential indicators, BHP Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Calissio Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calissio Resources Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Calissio Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Calissio Resources

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

The idea behind BHP Group Limited and Calissio Resources Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.