Correlation Between RYU Apparel and BHP Group

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

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

Diversification Opportunities for RYU Apparel and BHP Group

0.04

Correlation Coefficient

RYU Apparel  BHP Group

Significant diversification

The 3 months correlation between RYU and BHP is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding RYU Apparel 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 RYU Apparel 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 RYU Apparel 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 RYU Apparel i.e., RYU Apparel and BHP Group go up and down completely randomly.

Pair Corralation between RYU Apparel and BHP Group

Assuming the 90 days horizon RYU Apparel is expected to under-perform the BHP Group. In addition to that, RYU Apparel is 7.55 times more volatile than BHP Group Limited. It trades about 0.0 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.04 per unit of volatility. If you would invest  4,569  in BHP Group Limited on January 25, 2024 and sell it today you would earn a total of  1,355  from holding BHP Group Limited or generate 29.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.42%
Values	Daily Returns

RYU Apparel  vs.  BHP Group Limited

RYU Apparel

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 RYU Apparel and BHP Group

The main advantage of trading using opposite RYU Apparel and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RYU Apparel 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 RYU Apparel 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.