Correlation Between Glencore Plc and BHP

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

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

Diversification Opportunities for Glencore Plc and BHP

0.0

Correlation Coefficient

Glencore Plc  BHP

Pay attention - limited upside

The 3 months correlation between Glencore and BHP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Glencore plc and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group and Glencore Plc 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 Glencore plc are associated (or correlated) with BHP. 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 has no effect on the direction of Glencore Plc i.e., Glencore Plc and BHP go up and down completely randomly.

Pair Corralation between Glencore Plc and BHP

If you would invest  113,920  in BHP Group on September 23, 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	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Glencore plc  vs.  BHP Group

Glencore plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Glencore Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Glencore Plc and BHP

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

The idea behind Glencore plc and BHP Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.