Correlation Between BHP Group and Mystate

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

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

Diversification Opportunities for BHP Group and Mystate

-0.64

Correlation Coefficient

BHP Group  Mystate

Excellent diversification

The 3 months correlation between BHP and Mystate is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Mystate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mystate and BHP Group 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 BHP Group Limited are associated (or correlated) with Mystate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mystate has no effect on the direction of BHP Group i.e., BHP Group and Mystate go up and down completely randomly.

Pair Corralation between BHP Group and Mystate

Assuming the 90 days trading horizon BHP Group Limited is expected to generate 1.04 times more return on investment than Mystate. However, BHP Group is 1.04 times more volatile than Mystate. It trades about 0.07 of its potential returns per unit of risk. Mystate is currently generating about 0.07 per unit of risk. If you would invest  3,960  in BHP Group Limited on September 13, 2024 and sell it today you would earn a total of  240.00  from holding BHP Group Limited or generate 6.06% return on investment over 90 days.

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

BHP Group Limited  vs.  Mystate

BHP Group Limited

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BHP Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mystate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mystate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mystate is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BHP Group and Mystate

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

The idea behind BHP Group Limited and Mystate 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.