Correlation Between BHP Group and USCorp

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

Diversification Opportunities for BHP Group and USCorp

0.0

Correlation Coefficient

BHP Group  USCorp

Pay attention - limited upside

The 3 months correlation between BHP and USCorp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and USCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCorp 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 USCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCorp has no effect on the direction of BHP Group i.e., BHP Group and USCorp go up and down completely randomly.

Pair Corralation between BHP Group and USCorp

If you would invest  0.01  in USCorp on August 20, 2024 and sell it today you would earn a total of  0.00  from holding USCorp or generate 0.0% return on investment over 90 days.

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

BHP Group Limited  vs.  USCorp

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 current stock price agitation, may contribute to short-term losses for the retail investors.

USCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, USCorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BHP Group and USCorp

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

The idea behind BHP Group Limited and USCorp 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.