Correlation Between BHP Group and Malaga Financial

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

Diversification Opportunities for BHP Group and Malaga Financial

0.17

Correlation Coefficient

BHP Group  Malaga Financial

Average diversification

The 3 months correlation between BHP and Malaga is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Malaga Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaga Financial 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 Malaga Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaga Financial has no effect on the direction of BHP Group i.e., BHP Group and Malaga Financial go up and down completely randomly.

Pair Corralation between BHP Group and Malaga Financial

Considering the 90-day investment horizon BHP Group Limited is expected to generate 2.87 times more return on investment than Malaga Financial. However, BHP Group is 2.87 times more volatile than Malaga Financial. It trades about 0.1 of its potential returns per unit of risk. Malaga Financial is currently generating about -0.03 per unit of risk. If you would invest  5,696  in BHP Group Limited on January 24, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

BHP Group Limited  vs.  Malaga Financial

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.

Malaga Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malaga Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Malaga Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BHP Group and Malaga Financial

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

The idea behind BHP Group Limited and Malaga Financial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.