Correlation Between US Bancorp and BHP

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

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

Diversification Opportunities for US Bancorp and BHP

0.0

Correlation Coefficient

US Bancorp  BHP

Pay attention - limited upside

The 3 months correlation between USB and BHP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group and US Bancorp 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 US Bancorp are associated (or correlated) with BHP. 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 has no effect on the direction of US Bancorp i.e., US Bancorp and BHP go up and down completely randomly.

Pair Corralation between US Bancorp and BHP

If you would invest  113,920  in BHP Group on October 16, 2024 and sell it today you would earn a total of  0.00  from holding BHP Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

US Bancorp  vs.  BHP Group

US Bancorp

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BHP Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, BHP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with US Bancorp and BHP

The main advantage of trading using opposite US Bancorp and BHP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, BHP 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 will offset losses from the drop in BHP's long position.

The idea behind US Bancorp and BHP Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.