Correlation Between BTU Metals and Gold Springs

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

Diversification Opportunities for BTU Metals and Gold Springs

0.16

Correlation Coefficient

BTU Metals  Gold Springs

Average diversification

The 3 months correlation between BTU and Gold is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Gold Springs Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Springs Resource 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 Gold Springs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Springs Resource has no effect on the direction of BTU Metals i.e., BTU Metals and Gold Springs go up and down completely randomly.

Pair Corralation between BTU Metals and Gold Springs

Assuming the 90 days horizon BTU Metals Corp is expected to under-perform the Gold Springs. But the otc stock apears to be less risky and, when comparing its historical volatility, BTU Metals Corp is 1.55 times less risky than Gold Springs. The otc stock trades about -0.16 of its potential returns per unit of risk. The Gold Springs Resource is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Gold Springs Resource on September 4, 2024 and sell it today you would lose (1.54) from holding Gold Springs Resource or give up 22.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

BTU Metals Corp  vs.  Gold Springs Resource

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.

Gold Springs Resource

Risk-Adjusted Performance

0 of 100

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 weak 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.

Pair Trading with BTU Metals and Gold Springs

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

The idea behind BTU Metals Corp and Gold Springs Resource 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.