Correlation Between BHP and Compaa Minera

Can any of the company-specific risk be diversified away by investing in both BHP and Compaa Minera 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 and Compaa Minera into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BHP Group and Compaa Minera Autln, you can compare the effects of market volatilities on BHP and Compaa Minera 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 with a short position of Compaa Minera. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP and Compaa Minera.

Diversification Opportunities for BHP and Compaa Minera

0.22

Correlation Coefficient

BHP  Compaa Minera

Modest diversification

The 3 months correlation between BHP and Compaa is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group and Compaa Minera Autln in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compaa Minera Autln and BHP 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 are associated (or correlated) with Compaa Minera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compaa Minera Autln has no effect on the direction of BHP i.e., BHP and Compaa Minera go up and down completely randomly.

Pair Corralation between BHP and Compaa Minera

Assuming the 90 days trading horizon BHP Group is expected to generate 0.72 times more return on investment than Compaa Minera. However, BHP Group is 1.39 times less risky than Compaa Minera. It trades about 0.01 of its potential returns per unit of risk. Compaa Minera Autln is currently generating about -0.06 per unit of risk. If you would invest  108,489  in BHP Group on September 23, 2024 and sell it today you would earn a total of  5,431  from holding BHP Group or generate 5.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

BHP Group  vs.  Compaa Minera Autln

BHP Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BHP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compaa Minera Autln

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compaa Minera Autln has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Compaa Minera is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BHP and Compaa Minera

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

The idea behind BHP Group and Compaa Minera Autln 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.