Correlation Between BHP GROUP and Under Armour

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Can any of the company-specific risk be diversified away by investing in both BHP GROUP and Under Armour 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 Under Armour into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP GROUP LTD and Under Armour, you can compare the effects of market volatilities on BHP GROUP and Under Armour 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 Under Armour. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP GROUP and Under Armour.

Diversification Opportunities for BHP GROUP and Under Armour

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between BHPLF and Under is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BHP GROUP LTD and Under Armour Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Under Armour 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 LTD are associated (or correlated) with Under Armour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Under Armour has no effect on the direction of BHP GROUP i.e., BHP GROUP and Under Armour go up and down completely randomly.

Pair Corralation between BHP GROUP and Under Armour

Assuming the 90 days horizon BHP GROUP LTD is expected to generate 1.18 times more return on investment than Under Armour. However, BHP GROUP is 1.18 times more volatile than Under Armour. It trades about 0.04 of its potential returns per unit of risk. Under Armour is currently generating about -0.07 per unit of risk. If you would invest  2,464  in BHP GROUP LTD on September 1, 2022 and sell it today you would earn a total of  561.00  from holding BHP GROUP LTD or generate 22.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

BHP GROUP LTD  vs.  Under Armour Inc

 Performance (%) 
       Timeline  
BHP GROUP LTD 
BHPLF Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BHP GROUP LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, BHP GROUP exhibited solid returns over the last few months and may actually be approaching a breakup point.

BHPLF Price Channel

Under Armour 
Under Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Under Armour are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Under Armour sustained solid returns over the last few months and may actually be approaching a breakup point.

Under Price Channel

BHP GROUP and Under Armour Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BHP GROUP and Under Armour

The main advantage of trading using opposite BHP GROUP and Under Armour positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP GROUP position performs unexpectedly, Under Armour 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 Under Armour will offset losses from the drop in Under Armour's long position.
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The idea behind BHP GROUP LTD and Under Armour 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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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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