Correlation Between BTU Metals and Dow Jones
Can any of the company-specific risk be diversified away by investing in both BTU Metals and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on BTU Metals and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTU Metals and Dow Jones.
Diversification Opportunities for BTU Metals and Dow Jones
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BTU and Dow is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of BTU Metals i.e., BTU Metals and Dow Jones go up and down completely randomly.
Pair Corralation between BTU Metals and Dow Jones
Assuming the 90 days horizon BTU Metals Corp is expected to generate 12.33 times more return on investment than Dow Jones. However, BTU Metals is 12.33 times more volatile than Dow Jones Industrial. It trades about 0.02 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 2.50 in BTU Metals Corp on August 29, 2024 and sell it today you would lose (0.45) from holding BTU Metals Corp or give up 18.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BTU Metals Corp vs. Dow Jones Industrial
Performance |
| Timeline |
BTU Metals and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
BTU Metals Corp
Pair trading matchups for BTU Metals
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with BTU Metals and Dow Jones
The main advantage of trading using opposite BTU Metals and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTU Metals position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| BTU Metals vs. Assurant | BTU Metals vs. The Hanover Insurance | BTU Metals vs. Chester Mining | BTU Metals vs. Palomar Holdings |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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