Correlation Between BHP Group and Commander Resources

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

Diversification Opportunities for BHP Group and Commander Resources

-0.05

Correlation Coefficient

BHP Group  Commander Resources

Good diversification

The 3 months correlation between BHP and Commander is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander 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 Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of BHP Group i.e., BHP Group and Commander Resources go up and down completely randomly.

Pair Corralation between BHP Group and Commander Resources

Considering the 90-day investment horizon BHP Group Limited is expected to generate 11.66 times more return on investment than Commander Resources. However, BHP Group is 11.66 times more volatile than Commander Resources. It trades about 0.02 of its potential returns per unit of risk. Commander Resources is currently generating about 0.13 per unit of risk. If you would invest  5,604  in BHP Group Limited on March 14, 2024 and sell it today you would earn a total of  76.00  from holding BHP Group Limited or generate 1.36% return on investment over 90 days.

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

BHP Group Limited  vs.  Commander Resources

BHP Group Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, BHP Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Commander Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commander Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Commander Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BHP Group and Commander Resources

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

The idea behind BHP Group Limited and Commander 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.