Correlation Between Coreshares Index and BHP Group

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

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

Diversification Opportunities for Coreshares Index and BHP Group

0.74

Correlation Coefficient

Coreshares Index  BHP Group

Poor diversification

The 3 months correlation between Coreshares and BHP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker 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 Coreshares Index 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 Coreshares Index Tracker 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 Coreshares Index i.e., Coreshares Index and BHP Group go up and down completely randomly.

Pair Corralation between Coreshares Index and BHP Group

Assuming the 90 days trading horizon Coreshares Index Tracker is expected to generate 0.59 times more return on investment than BHP Group. However, Coreshares Index Tracker is 1.71 times less risky than BHP Group. It trades about 0.07 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.04 per unit of risk. If you would invest  105,800  in Coreshares Index Tracker on September 12, 2024 and sell it today you would earn a total of  4,200  from holding Coreshares Index Tracker or generate 3.97% return on investment over 90 days.

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

Coreshares Index Tracker  vs.  BHP Group Limited

Coreshares Index Tracker

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of rather sound technical and fundamental indicators, BHP Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coreshares Index and BHP Group

The main advantage of trading using opposite Coreshares Index and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coreshares Index 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 Coreshares Index Tracker 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.