Correlation Between FLOW TRADERS and BHP Group

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

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

Diversification Opportunities for FLOW TRADERS and BHP Group

-0.39

Correlation Coefficient

FLOW TRADERS  BHP Group

Very good diversification

The 3 months correlation between FLOW and BHP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding FLOW TRADERS LTD 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 FLOW TRADERS 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 FLOW TRADERS LTD 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 FLOW TRADERS i.e., FLOW TRADERS and BHP Group go up and down completely randomly.

Pair Corralation between FLOW TRADERS and BHP Group

Assuming the 90 days horizon FLOW TRADERS LTD is expected to generate 0.86 times more return on investment than BHP Group. However, FLOW TRADERS LTD is 1.16 times less risky than BHP Group. It trades about 0.14 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.16 per unit of risk. If you would invest  2,134  in FLOW TRADERS LTD on September 24, 2024 and sell it today you would earn a total of  80.00  from holding FLOW TRADERS LTD or generate 3.75% return on investment over 90 days.

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

FLOW TRADERS LTD  vs.  BHP Group Limited

FLOW TRADERS LTD

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FLOW TRADERS reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with FLOW TRADERS and BHP Group

The main advantage of trading using opposite FLOW TRADERS and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLOW TRADERS 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 FLOW TRADERS LTD 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..