Correlation Between Peak Resources and BHP Group

Can any of the company-specific risk be diversified away by investing in both Peak 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 Peak 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 Peak Resources Limited and BHP Group Limited, you can compare the effects of market volatilities on Peak 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 Peak Resources with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peak Resources and BHP Group.

Diversification Opportunities for Peak Resources and BHP Group

0.23

Correlation Coefficient

Peak Resources  BHP Group

Modest diversification

The 3 months correlation between Peak and BHP is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Peak 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 Peak 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 Peak 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 Peak Resources i.e., Peak Resources and BHP Group go up and down completely randomly.

Pair Corralation between Peak Resources and BHP Group

Assuming the 90 days horizon Peak Resources Limited is expected to under-perform the BHP Group. In addition to that, Peak Resources is 5.08 times more volatile than BHP Group Limited. It trades about -0.04 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.07 per unit of volatility. If you would invest  2,374  in BHP Group Limited on September 12, 2024 and sell it today you would earn a total of  183.00  from holding BHP Group Limited or generate 7.71% return on investment over 90 days.

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

Peak Resources Limited  vs.  BHP Group Limited

Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

BHP Group Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly 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 Peak Resources and BHP Group

The main advantage of trading using opposite Peak Resources and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peak 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 Peak 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.