Correlation Between BHP and US Bancorp
Can any of the company-specific risk be diversified away by investing in both BHP and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group and US Bancorp, you can compare the effects of market volatilities on BHP and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP and US Bancorp.
Diversification Opportunities for BHP and US Bancorp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BHP and USB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of BHP i.e., BHP and US Bancorp go up and down completely randomly.
Pair Corralation between BHP and US Bancorp
If you would invest 113,920 in BHP Group on September 25, 2024 and sell it today you would earn a total of 0.00 from holding BHP Group or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BHP Group vs. US Bancorp
Performance |
Timeline |
BHP Group |
US Bancorp |
BHP and US Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BHP and US Bancorp
The main advantage of trading using opposite BHP and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.The idea behind BHP Group and US Bancorp 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.US Bancorp vs. Southern Copper | US Bancorp vs. Monster Beverage Corp | US Bancorp vs. BHP Group | US Bancorp vs. Prudential Financial |
Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |