Correlation Between BHP Group and American West
Can any of the company-specific risk be diversified away by investing in both BHP Group and American West 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 American West 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 American West Metals, you can compare the effects of market volatilities on BHP Group and American West 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 American West. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and American West.
Diversification Opportunities for BHP Group and American West
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between BHP and American is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and American West Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American West Metals 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 American West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American West Metals has no effect on the direction of BHP Group i.e., BHP Group and American West go up and down completely randomly.
Pair Corralation between BHP Group and American West
Assuming the 90 days horizon BHP Group Limited is expected to under-perform the American West. But the pink sheet apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 8.43 times less risky than American West. The pink sheet trades about -0.06 of its potential returns per unit of risk. The American West Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3.63 in American West Metals on September 1, 2025 and sell it today you would lose (0.03) from holding American West Metals or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. American West Metals
Performance |
| Timeline |
| BHP Group Limited |
| American West Metals |
BHP Group and American West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and American West
The main advantage of trading using opposite BHP Group and American West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, American West 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 American West will offset losses from the drop in American West's long position.| BHP Group vs. Topsports International Holdings | BHP Group vs. Brandywine Realty Trust | BHP Group vs. EVO Transportation Energy | BHP Group vs. Nationwide Utilities |
| American West vs. BHP Group Limited | American West vs. Rio Tinto Group | American West vs. BHP Group Limited | American West vs. Rio Tinto Group |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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