Correlation Between Gold Springs and BTU Metals

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

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

Diversification Opportunities for Gold Springs and BTU Metals

-0.48

Correlation Coefficient

Gold Springs  BTU Metals

Very good diversification

The 3 months correlation between Gold and BTU is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gold Springs Resource 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 Gold Springs 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 Gold Springs Resource 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 Gold Springs i.e., Gold Springs and BTU Metals go up and down completely randomly.

Pair Corralation between Gold Springs and BTU Metals

Assuming the 90 days horizon Gold Springs Resource is expected to under-perform the BTU Metals. But the otc stock apears to be less risky and, when comparing its historical volatility, Gold Springs Resource is 1.65 times less risky than BTU Metals. The otc stock trades about -0.03 of its potential returns per unit of risk. The BTU Metals Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.00  in BTU Metals Corp on December 27, 2024 and sell it today you would earn a total of  0.95  from holding BTU Metals Corp or generate 47.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Gold Springs Resource  vs.  BTU Metals Corp

Gold Springs Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gold Springs Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BTU Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BTU Metals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, BTU Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Springs and BTU Metals

The main advantage of trading using opposite Gold Springs and BTU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Springs 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 Gold Springs Resource 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.