Correlation Between BHP Group and Copper Lake

Can any of the company-specific risk be diversified away by investing in both BHP Group and Copper Lake 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 Copper Lake 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 Copper Lake Resources, you can compare the effects of market volatilities on BHP Group and Copper Lake 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 Copper Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Copper Lake.

Diversification Opportunities for BHP Group and Copper Lake

0.59

Correlation Coefficient

BHP Group  Copper Lake

Very weak diversification

The 3 months correlation between BHP and Copper is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Copper Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Lake Resources 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 Copper Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Lake Resources has no effect on the direction of BHP Group i.e., BHP Group and Copper Lake go up and down completely randomly.

Pair Corralation between BHP Group and Copper Lake

Considering the 90-day investment horizon BHP Group Limited is expected to under-perform the Copper Lake. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 18.8 times less risky than Copper Lake. The stock trades about -0.08 of its potential returns per unit of risk. The Copper Lake Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.89  in Copper Lake Resources on September 23, 2024 and sell it today you would lose (0.74) from holding Copper Lake Resources or give up 83.15% of portfolio value over 90 days.

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

BHP Group Limited  vs.  Copper Lake Resources

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. Even with latest unsteady performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Copper Lake Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Copper Lake Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Copper Lake reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHP Group and Copper Lake

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

The idea behind BHP Group Limited and Copper Lake Resources 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.