Correlation Between Banco Macro and BHP Group

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

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

Diversification Opportunities for Banco Macro and BHP Group

-0.67

Correlation Coefficient

Banco Macro  BHP Group

Excellent diversification

The 3 months correlation between Banco and BHP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Banco Macro 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 Banco Macro SA are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Banco Macro i.e., Banco Macro and BHP Group go up and down completely randomly.

Pair Corralation between Banco Macro and BHP Group

Assuming the 90 days trading horizon Banco Macro SA is expected to under-perform the BHP Group. In addition to that, Banco Macro is 1.96 times more volatile than BHP Group Limited. It trades about -0.03 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.1 per unit of volatility. If you would invest  2,853,086  in BHP Group Limited on December 29, 2024 and sell it today you would earn a total of  344,414  from holding BHP Group Limited or generate 12.07% return on investment over 90 days.

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

Banco Macro SA  vs.  BHP Group Limited

Banco Macro SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco Macro SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BHP Group Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BHP Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Macro and BHP Group

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

The idea behind Banco Macro SA and BHP Group Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.