Correlation Between BTU Metals and Hummingbird Resources

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

Diversification Opportunities for BTU Metals and Hummingbird Resources

0.57

Correlation Coefficient

BTU Metals  Hummingbird Resources

Very weak diversification

The 3 months correlation between BTU and Hummingbird is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Hummingbird Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hummingbird Resources PLC 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 Hummingbird Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hummingbird Resources PLC has no effect on the direction of BTU Metals i.e., BTU Metals and Hummingbird Resources go up and down completely randomly.

Pair Corralation between BTU Metals and Hummingbird Resources

Assuming the 90 days horizon BTU Metals Corp is expected to generate 0.88 times more return on investment than Hummingbird Resources. However, BTU Metals Corp is 1.14 times less risky than Hummingbird Resources. It trades about 0.02 of its potential returns per unit of risk. Hummingbird Resources PLC is currently generating about -0.02 per unit of risk. If you would invest  3.34  in BTU Metals Corp on August 31, 2024 and sell it today you would lose (1.29) from holding BTU Metals Corp or give up 38.62% of portfolio value over 90 days.

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

BTU Metals Corp  vs.  Hummingbird Resources PLC

BTU Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTU Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hummingbird Resources PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hummingbird Resources PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BTU Metals and Hummingbird Resources

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

The idea behind BTU Metals Corp and Hummingbird Resources PLC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.