Correlation Between Computershare and BHP Group

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

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

Diversification Opportunities for Computershare and BHP Group

-0.55

Correlation Coefficient

Computershare  BHP Group

Excellent diversification

The 3 months correlation between Computershare and BHP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Computershare 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 Computershare 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 Computershare 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 Computershare i.e., Computershare and BHP Group go up and down completely randomly.

Pair Corralation between Computershare and BHP Group

Assuming the 90 days trading horizon Computershare is expected to generate 1.06 times more return on investment than BHP Group. However, Computershare is 1.06 times more volatile than BHP Group Limited. It trades about 0.17 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.08 per unit of risk. If you would invest  2,803  in Computershare on September 5, 2024 and sell it today you would earn a total of  485.00  from holding Computershare or generate 17.3% return on investment over 90 days.

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

Computershare  vs.  BHP Group Limited

Computershare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computershare unveiled solid returns over the last few months and may actually be approaching a breakup point.

BHP Group Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BHP Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Computershare and BHP Group

The main advantage of trading using opposite Computershare and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computershare 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 Computershare 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.