Correlation Between Dupont De and BHP Group

Can any of the company-specific risk be diversified away by investing in both Dupont De and BHP Group 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 Dupont De and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and BHP Group Limited, you can compare the effects of market volatilities on Dupont De and BHP Group 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 Dupont De with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and BHP Group.

Diversification Opportunities for Dupont De and BHP Group

-0.26

Correlation Coefficient

Dupont De  BHP Group

Very good diversification

The 3 months correlation between Dupont and BHP is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Dupont De 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 Dupont De Nemours are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Dupont De i.e., Dupont De and BHP Group go up and down completely randomly.

Pair Corralation between Dupont De and BHP Group

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the BHP Group. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.46 times less risky than BHP Group. The stock trades about -0.12 of its potential returns per unit of risk. The BHP Group Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dupont De Nemours  vs.  BHP Group Limited

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Dupont De and BHP Group

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

The idea behind Dupont De Nemours and BHP Group Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.