Correlation Between ALX Uranium and Denison Mines

Can any of the company-specific risk be diversified away by investing in both ALX Uranium and Denison Mines 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 ALX Uranium and Denison Mines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALX Uranium Corp and Denison Mines Corp, you can compare the effects of market volatilities on ALX Uranium and Denison Mines 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 ALX Uranium with a short position of Denison Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALX Uranium and Denison Mines.

Diversification Opportunities for ALX Uranium and Denison Mines

0.83

Correlation Coefficient

ALX Uranium  Denison Mines

Very poor diversification

The 3 months correlation between ALX and Denison is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ALX Uranium Corp and Denison Mines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denison Mines Corp and ALX Uranium 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 ALX Uranium Corp are associated (or correlated) with Denison Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denison Mines Corp has no effect on the direction of ALX Uranium i.e., ALX Uranium and Denison Mines go up and down completely randomly.

Pair Corralation between ALX Uranium and Denison Mines

Given the investment horizon of 90 days ALX Uranium Corp is expected to generate 3.89 times more return on investment than Denison Mines. However, ALX Uranium is 3.89 times more volatile than Denison Mines Corp. It trades about 0.11 of its potential returns per unit of risk. Denison Mines Corp is currently generating about 0.18 per unit of risk. If you would invest  2.00  in ALX Uranium Corp on September 17, 2024 and sell it today you would earn a total of  1.00  from holding ALX Uranium Corp or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ALX Uranium Corp  vs.  Denison Mines Corp

ALX Uranium Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALX Uranium Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALX Uranium showed solid returns over the last few months and may actually be approaching a breakup point.

Denison Mines Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Denison Mines Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Denison Mines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALX Uranium and Denison Mines

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

The idea behind ALX Uranium Corp and Denison Mines Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.