Correlation Between Vanguard Funds and BHP Group

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

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

Diversification Opportunities for Vanguard Funds and BHP Group

-0.4

Correlation Coefficient

Vanguard Funds  BHP Group

Very good diversification

The 3 months correlation between Vanguard and BHP is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public 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 Vanguard Funds 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 Vanguard Funds Public 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 Vanguard Funds i.e., Vanguard Funds and BHP Group go up and down completely randomly.

Pair Corralation between Vanguard Funds and BHP Group

Assuming the 90 days trading horizon Vanguard Funds Public is expected to generate 0.48 times more return on investment than BHP Group. However, Vanguard Funds Public is 2.09 times less risky than BHP Group. It trades about 0.23 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  9,582  in Vanguard Funds Public on September 16, 2024 and sell it today you would earn a total of  1,324  from holding Vanguard Funds Public or generate 13.82% return on investment over 90 days.

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

Vanguard Funds Public  vs.  BHP Group Limited

Vanguard Funds Public

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vanguard Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BHP Group Limited

Risk-Adjusted Performance

2 of 100

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. Despite nearly stable basic indicators, BHP Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Funds and BHP Group

The main advantage of trading using opposite Vanguard Funds and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Funds 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 Vanguard Funds Public 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.