Correlation Between Rubicon Water and BHP Group

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

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

Diversification Opportunities for Rubicon Water and BHP Group

-0.21

Correlation Coefficient

Rubicon Water  BHP Group

Very good diversification

The 3 months correlation between Rubicon and BHP is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Water 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 Rubicon Water 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 Rubicon Water 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 Rubicon Water i.e., Rubicon Water and BHP Group go up and down completely randomly.

Pair Corralation between Rubicon Water and BHP Group

Assuming the 90 days trading horizon Rubicon Water is expected to generate 4.58 times more return on investment than BHP Group. However, Rubicon Water is 4.58 times more volatile than BHP Group Limited. It trades about 0.02 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.03 per unit of risk. If you would invest  29.00  in Rubicon Water on December 29, 2024 and sell it today you would lose (1.00) from holding Rubicon Water or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Rubicon Water  vs.  BHP Group Limited

Rubicon Water

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Water are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Rubicon Water is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BHP Group Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BHP Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rubicon Water and BHP Group

The main advantage of trading using opposite Rubicon Water and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rubicon Water 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 Rubicon Water 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.