Correlation Between Jindalee Resources and BHP Group

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

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

Diversification Opportunities for Jindalee Resources and BHP Group

0.24

Correlation Coefficient

Jindalee Resources  BHP Group

Modest diversification

The 3 months correlation between Jindalee and BHP is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Jindalee Resources Limited 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 Jindalee Resources 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 Jindalee Resources Limited 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 Jindalee Resources i.e., Jindalee Resources and BHP Group go up and down completely randomly.

Pair Corralation between Jindalee Resources and BHP Group

Assuming the 90 days horizon Jindalee Resources Limited is expected to generate 10.56 times more return on investment than BHP Group. However, Jindalee Resources is 10.56 times more volatile than BHP Group Limited. It trades about 0.07 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.06 per unit of risk. If you would invest  14.00  in Jindalee Resources Limited on December 20, 2024 and sell it today you would earn a total of  1.00  from holding Jindalee Resources Limited or generate 7.14% return on investment over 90 days.

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

Jindalee Resources Limited  vs.  BHP Group Limited

Jindalee Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jindalee Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jindalee Resources reported solid returns over the last few months and may actually be approaching a breakup point.

BHP Group Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, BHP Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Jindalee Resources and BHP Group

The main advantage of trading using opposite Jindalee Resources and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jindalee Resources 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 Jindalee Resources Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.