Correlation Between BHP and Impulsora Del

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

By analyzing existing cross correlation between BHP Group and Impulsora del Desarrollo, you can compare the effects of market volatilities on BHP and Impulsora Del 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 Impulsora Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP and Impulsora Del.

Diversification Opportunities for BHP and Impulsora Del

0.73

Correlation Coefficient

BHP  Impulsora Del

Poor diversification

The 3 months correlation between BHP and Impulsora is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group and Impulsora del Desarrollo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impulsora del Desarrollo 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 Impulsora Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impulsora del Desarrollo has no effect on the direction of BHP i.e., BHP and Impulsora Del go up and down completely randomly.

Pair Corralation between BHP and Impulsora Del

Assuming the 90 days trading horizon BHP Group is expected to generate 8.65 times more return on investment than Impulsora Del. However, BHP is 8.65 times more volatile than Impulsora del Desarrollo. It trades about 0.07 of its potential returns per unit of risk. Impulsora del Desarrollo is currently generating about -0.03 per unit of risk. If you would invest  99,689  in BHP Group on September 23, 2024 and sell it today you would earn a total of  14,231  from holding BHP Group or generate 14.28% return on investment over 90 days.

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

BHP Group  vs.  Impulsora del Desarrollo

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.

Impulsora del Desarrollo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impulsora del Desarrollo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Impulsora Del 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 Impulsora Del

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

The idea behind BHP Group and Impulsora del Desarrollo 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.