Correlation Between BHP Group and Denison Mines
Can any of the company-specific risk be diversified away by investing in both BHP Group and Denison Mines 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 Denison Mines 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 Denison Mines Corp, you can compare the effects of market volatilities on BHP Group and Denison Mines 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 Denison Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Denison Mines.
Diversification Opportunities for BHP Group and Denison Mines
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Denison is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Denison Mines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denison Mines Corp 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 Denison Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denison Mines Corp has no effect on the direction of BHP Group i.e., BHP Group and Denison Mines go up and down completely randomly.
Pair Corralation between BHP Group and Denison Mines
Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.61 times more return on investment than Denison Mines. However, BHP Group Limited is 1.63 times less risky than Denison Mines. It trades about 0.1 of its potential returns per unit of risk. Denison Mines Corp is currently generating about 0.03 per unit of risk. If you would invest 5,696 in BHP Group Limited on January 25, 2024 and sell it today you would earn a total of 174.00 from holding BHP Group Limited or generate 3.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Denison Mines Corp
Performance |
| Timeline |
| BHP Group Limited |
| Denison Mines Corp |
BHP Group and Denison Mines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Denison Mines
The main advantage of trading using opposite BHP Group and Denison Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Denison Mines 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 Denison Mines will offset losses from the drop in Denison Mines' long position.| BHP Group vs. Skeena Resources | BHP Group vs. Materion | BHP Group vs. Fury Gold Mines | BHP Group vs. Eskay Mining Corp |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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