Correlation Between BHP Group and Cemex SAB

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

Diversification Opportunities for BHP Group and Cemex SAB

0.18

Correlation Coefficient

BHP Group  Cemex SAB

Average diversification

The 3 months correlation between BHP and Cemex is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Cemex SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemex SAB de 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 Cemex SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemex SAB de has no effect on the direction of BHP Group i.e., BHP Group and Cemex SAB go up and down completely randomly.

Pair Corralation between BHP Group and Cemex SAB

Considering the 90-day investment horizon BHP Group Limited is expected to generate 0.81 times more return on investment than Cemex SAB. However, BHP Group Limited is 1.23 times less risky than Cemex SAB. It trades about 0.11 of its potential returns per unit of risk. Cemex SAB de is currently generating about 0.02 per unit of risk. If you would invest  5,579  in BHP Group Limited on January 26, 2024 and sell it today you would earn a total of  345.00  from holding BHP Group Limited or generate 6.18% return on investment over 90 days.

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

BHP Group Limited  vs.  Cemex SAB de

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 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.

Cemex SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemex SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cemex SAB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BHP Group and Cemex SAB

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

The idea behind BHP Group Limited and Cemex SAB de 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.