Correlation Between Denison Mines and BTU Metals

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

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

Diversification Opportunities for Denison Mines and BTU Metals

0.18

Correlation Coefficient

Denison Mines  BTU Metals

Average diversification

The 3 months correlation between Denison and BTU is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Denison Mines Corp and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp and Denison Mines 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 Denison Mines Corp are associated (or correlated) with BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of Denison Mines i.e., Denison Mines and BTU Metals go up and down completely randomly.

Pair Corralation between Denison Mines and BTU Metals

Considering the 90-day investment horizon Denison Mines Corp is expected to under-perform the BTU Metals. But the stock apears to be less risky and, when comparing its historical volatility, Denison Mines Corp is 1.12 times less risky than BTU Metals. The stock trades about -0.03 of its potential returns per unit of risk. The BTU Metals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.01  in BTU Metals Corp on October 8, 2024 and sell it today you would lose (0.01) from holding BTU Metals Corp or give up 0.5% of portfolio value over 90 days.

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

Denison Mines Corp  vs.  BTU Metals Corp

Denison Mines Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Denison Mines Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Denison Mines displayed solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable primary indicators, BTU Metals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Denison Mines and BTU Metals

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

The idea behind Denison Mines Corp and BTU Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.