Correlation Between BHP Group and Barsele Minerals

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

Diversification Opportunities for BHP Group and Barsele Minerals

0.28

Correlation Coefficient

BHP Group  Barsele Minerals

Modest diversification

The 3 months correlation between BHP and Barsele is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Barsele Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barsele Minerals 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 Barsele Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barsele Minerals Corp has no effect on the direction of BHP Group i.e., BHP Group and Barsele Minerals go up and down completely randomly.

Pair Corralation between BHP Group and Barsele Minerals

Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Barsele Minerals. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 2.5 times less risky than Barsele Minerals. The stock trades about -0.11 of its potential returns per unit of risk. The Barsele Minerals Corp is currently generating about 0.73 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Barsele Minerals Corp on March 16, 2024 and sell it today you would earn a total of  2.00  from holding Barsele Minerals Corp or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	23.81%
Values	Daily Returns

BHP Group Limited  vs.  Barsele Minerals Corp

BHP Group Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BHP Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Barsele Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barsele Minerals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Barsele Minerals 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 Barsele Minerals

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

The idea behind BHP Group Limited and Barsele Minerals Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.