Correlation Between FPX Nickel and BHP Group

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

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

Diversification Opportunities for FPX Nickel and BHP Group

0.9

Correlation Coefficient

FPX Nickel  BHP Group

Almost no diversification

The 3 months correlation between FPX and BHP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp 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 FPX Nickel 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 FPX Nickel Corp 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 FPX Nickel i.e., FPX Nickel and BHP Group go up and down completely randomly.

Pair Corralation between FPX Nickel and BHP Group

Assuming the 90 days horizon FPX Nickel Corp is expected to under-perform the BHP Group. In addition to that, FPX Nickel is 2.66 times more volatile than BHP Group Limited. It trades about -0.1 of its total potential returns per unit of risk. BHP Group Limited is currently generating about -0.13 per unit of volatility. If you would invest  5,616  in BHP Group Limited on October 24, 2024 and sell it today you would lose (607.00) from holding BHP Group Limited or give up 10.81% of portfolio value over 90 days.

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

FPX Nickel Corp  vs.  BHP Group Limited

FPX Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FPX Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with FPX Nickel and BHP Group

The main advantage of trading using opposite FPX Nickel and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FPX Nickel 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 FPX Nickel Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.