Correlation Between BTU Metals and Gold Springs

Can any of the company-specific risk be diversified away by investing in both BTU Metals and Gold Springs 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 BTU Metals and Gold Springs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BTU Metals Corp and Gold Springs Resource, you can compare the effects of market volatilities on BTU Metals and Gold Springs 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 BTU Metals with a short position of Gold Springs. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTU Metals and Gold Springs.

Diversification Opportunities for BTU Metals and Gold Springs

-0.48

Correlation Coefficient

BTU Metals  Gold Springs

Very good diversification

The 3 months correlation between BTU and Gold is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Gold Springs Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Springs Resource and BTU Metals 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 BTU Metals Corp are associated (or correlated) with Gold Springs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Springs Resource has no effect on the direction of BTU Metals i.e., BTU Metals and Gold Springs go up and down completely randomly.

Pair Corralation between BTU Metals and Gold Springs

Assuming the 90 days horizon BTU Metals Corp is expected to generate 1.65 times more return on investment than Gold Springs. However, BTU Metals is 1.65 times more volatile than Gold Springs Resource. It trades about 0.11 of its potential returns per unit of risk. Gold Springs Resource is currently generating about -0.03 per unit of risk. If you would invest  2.00  in BTU Metals Corp on December 27, 2024 and sell it today you would earn a total of  0.95  from holding BTU Metals Corp or generate 47.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

BTU Metals Corp  vs.  Gold Springs Resource

BTU Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BTU Metals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, BTU Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Gold Springs Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gold Springs Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BTU Metals and Gold Springs

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

The idea behind BTU Metals Corp and Gold Springs Resource 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.