Correlation Between BHP and McEwen Mining
Can any of the company-specific risk be diversified away by investing in both BHP and McEwen Mining 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 and McEwen Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group and McEwen Mining, you can compare the effects of market volatilities on BHP and McEwen Mining 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 with a short position of McEwen Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP and McEwen Mining.
Diversification Opportunities for BHP and McEwen Mining
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BHP and McEwen is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining and BHP 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 are associated (or correlated) with McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of BHP i.e., BHP and McEwen Mining go up and down completely randomly.
Pair Corralation between BHP and McEwen Mining
Assuming the 90 days trading horizon BHP is expected to generate 24.32 times less return on investment than McEwen Mining. But when comparing it to its historical volatility, BHP Group is 5.37 times less risky than McEwen Mining. It trades about 0.02 of its potential returns per unit of risk. McEwen Mining is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,500 in McEwen Mining on September 25, 2024 and sell it today you would earn a total of 12,300 from holding McEwen Mining or generate 164.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BHP Group vs. McEwen Mining
Performance |
Timeline |
BHP Group |
McEwen Mining |
BHP and McEwen Mining Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BHP and McEwen Mining
The main advantage of trading using opposite BHP and McEwen Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP position performs unexpectedly, McEwen Mining 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 McEwen Mining will offset losses from the drop in McEwen Mining's long position.BHP vs. Grupo Sports World | BHP vs. GMxico Transportes SAB | BHP vs. First Republic Bank | BHP vs. Ameriprise Financial |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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