Correlation Between BTU Metals and Falcon Gold

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

Diversification Opportunities for BTU Metals and Falcon Gold

0.28

Correlation Coefficient

BTU Metals  Falcon Gold

Modest diversification

The 3 months correlation between BTU and Falcon is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Falcon Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Gold Corp 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 Falcon Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Gold Corp has no effect on the direction of BTU Metals i.e., BTU Metals and Falcon Gold go up and down completely randomly.

Pair Corralation between BTU Metals and Falcon Gold

Assuming the 90 days horizon BTU Metals Corp is expected to under-perform the Falcon Gold. But the otc stock apears to be less risky and, when comparing its historical volatility, BTU Metals Corp is 2.28 times less risky than Falcon Gold. The otc stock trades about -0.16 of its potential returns per unit of risk. The Falcon Gold Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.77  in Falcon Gold Corp on September 4, 2024 and sell it today you would lose (0.59) from holding Falcon Gold Corp or give up 21.3% of portfolio value over 90 days.

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

BTU Metals Corp  vs.  Falcon Gold Corp

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 weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Falcon Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Falcon Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BTU Metals and Falcon Gold

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

The idea behind BTU Metals Corp and Falcon Gold 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.