Correlation Between Tinka Resources and BHP Group

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

Diversification Opportunities for Tinka Resources and BHP Group

0.78

Correlation Coefficient

Tinka Resources  BHP Group

Poor diversification

The 3 months correlation between Tinka and BHP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tinka 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 Tinka 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 Tinka 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 Tinka Resources i.e., Tinka Resources and BHP Group go up and down completely randomly.

Pair Corralation between Tinka Resources and BHP Group

Assuming the 90 days horizon Tinka Resources Limited is expected to generate 9.98 times more return on investment than BHP Group. However, Tinka Resources is 9.98 times more volatile than BHP Group Limited. It trades about -0.04 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.56 per unit of risk. If you would invest  7.00  in Tinka Resources Limited on October 9, 2024 and sell it today you would lose (1.00) from holding Tinka Resources Limited or give up 14.29% of portfolio value over 90 days.

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

Tinka Resources Limited  vs.  BHP Group Limited

Tinka Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tinka Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Tinka Resources and BHP Group

The main advantage of trading using opposite Tinka Resources and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tinka 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 Tinka 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.