Correlation Between BTU Metals and Gold Terra

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

Diversification Opportunities for BTU Metals and Gold Terra

-0.62

Correlation Coefficient

BTU Metals  Gold Terra

Excellent diversification

The 3 months correlation between BTU and Gold is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Gold Terra Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Terra 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 Terra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Terra Resource has no effect on the direction of BTU Metals i.e., BTU Metals and Gold Terra go up and down completely randomly.

Pair Corralation between BTU Metals and Gold Terra

Assuming the 90 days horizon BTU Metals Corp is expected to generate 1.97 times more return on investment than Gold Terra. However, BTU Metals is 1.97 times more volatile than Gold Terra Resource. It trades about 0.02 of its potential returns per unit of risk. Gold Terra Resource is currently generating about -0.01 per unit of risk. If you would invest  2.50  in BTU Metals Corp on August 31, 2024 and sell it today you would lose (0.45) from holding BTU Metals Corp or give up 18.0% of portfolio value over 90 days.

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

BTU Metals Corp  vs.  Gold Terra Resource

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.

Gold Terra Resource

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Terra Resource are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Gold Terra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BTU Metals and Gold Terra

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

The idea behind BTU Metals Corp and Gold Terra 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.