Correlation Between Fidus Investment and BTU Metals

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

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

Diversification Opportunities for Fidus Investment and BTU Metals

0.2

Correlation Coefficient

Fidus Investment  BTU Metals

Modest diversification

The 3 months correlation between Fidus and BTU is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment 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 Fidus Investment 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 Fidus Investment 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 Fidus Investment i.e., Fidus Investment and BTU Metals go up and down completely randomly.

Pair Corralation between Fidus Investment and BTU Metals

Given the investment horizon of 90 days Fidus Investment is expected to generate 2.38 times less return on investment than BTU Metals. But when comparing it to its historical volatility, Fidus Investment Corp is 9.27 times less risky than BTU Metals. It trades about 0.08 of its potential returns per unit of risk. BTU Metals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.37  in BTU Metals Corp on October 9, 2024 and sell it today you would lose (0.37) from holding BTU Metals Corp or give up 15.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Fidus Investment Corp  vs.  BTU Metals Corp

Fidus Investment Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fidus Investment and BTU Metals

The main advantage of trading using opposite Fidus Investment and BTU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidus Investment 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 Fidus Investment 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.