Correlation Between Bushveld Minerals and American Helium

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

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

Diversification Opportunities for Bushveld Minerals and American Helium

0.13

Correlation Coefficient

Bushveld Minerals  American Helium

Average diversification

The 3 months correlation between Bushveld and American is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bushveld Minerals Limited and American Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Helium and Bushveld Minerals 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 Bushveld Minerals Limited are associated (or correlated) with American Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Helium has no effect on the direction of Bushveld Minerals i.e., Bushveld Minerals and American Helium go up and down completely randomly.

Pair Corralation between Bushveld Minerals and American Helium

Assuming the 90 days horizon Bushveld Minerals Limited is expected to generate 1.73 times more return on investment than American Helium. However, Bushveld Minerals is 1.73 times more volatile than American Helium. It trades about 0.22 of its potential returns per unit of risk. American Helium is currently generating about 0.11 per unit of risk. If you would invest  1.62  in Bushveld Minerals Limited on September 13, 2024 and sell it today you would lose (1.10) from holding Bushveld Minerals Limited or give up 67.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Bushveld Minerals Limited  vs.  American Helium

Bushveld Minerals

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bushveld Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

American Helium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, American Helium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bushveld Minerals and American Helium

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

The idea behind Bushveld Minerals Limited and American Helium 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.