Correlation Between Trematon Capital and BHP Group

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

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

Diversification Opportunities for Trematon Capital and BHP Group

0.24

Correlation Coefficient

Trematon Capital  BHP Group

Modest diversification

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

Pair Corralation between Trematon Capital and BHP Group

Assuming the 90 days trading horizon Trematon Capital Investments is expected to generate 4.5 times more return on investment than BHP Group. However, Trematon Capital is 4.5 times more volatile than BHP Group Limited. It trades about 0.15 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  22,000  in Trematon Capital Investments on October 1, 2024 and sell it today you would earn a total of  2,800  from holding Trematon Capital Investments or generate 12.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Trematon Capital Investments  vs.  BHP Group Limited

Trematon Capital Inv

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trematon Capital Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Trematon Capital exhibited 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. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Trematon Capital and BHP Group

The main advantage of trading using opposite Trematon Capital and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trematon Capital 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 Trematon Capital Investments 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.