Correlation Between Denison Mines and Macmahon Holdings

Can any of the company-specific risk be diversified away by investing in both Denison Mines and Macmahon Holdings 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 Macmahon Holdings 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 Macmahon Holdings Limited, you can compare the effects of market volatilities on Denison Mines and Macmahon Holdings 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 Macmahon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Denison Mines and Macmahon Holdings.

Diversification Opportunities for Denison Mines and Macmahon Holdings

0.78

Correlation Coefficient

Denison Mines  Macmahon Holdings

Poor diversification

The 3 months correlation between Denison and Macmahon is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Denison Mines Corp and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings 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 Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of Denison Mines i.e., Denison Mines and Macmahon Holdings go up and down completely randomly.

Pair Corralation between Denison Mines and Macmahon Holdings

Considering the 90-day investment horizon Denison Mines Corp is expected to generate 2.26 times more return on investment than Macmahon Holdings. However, Denison Mines is 2.26 times more volatile than Macmahon Holdings Limited. It trades about -0.02 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about -0.13 per unit of risk. If you would invest  219.00  in Denison Mines Corp on October 25, 2024 and sell it today you would lose (15.00) from holding Denison Mines Corp or give up 6.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Denison Mines Corp  vs.  Macmahon Holdings Limited

Denison Mines Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Denison Mines Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Denison Mines is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Macmahon Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Denison Mines and Macmahon Holdings

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

The idea behind Denison Mines Corp and Macmahon Holdings Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.