Correlation Between BTU Metals and 1st Federal
Can any of the company-specific risk be diversified away by investing in both BTU Metals and 1st Federal 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 1st Federal 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 1st Federal Savings, you can compare the effects of market volatilities on BTU Metals and 1st Federal 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 1st Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTU Metals and 1st Federal.
Diversification Opportunities for BTU Metals and 1st Federal
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BTU and 1st is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and 1st Federal Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Federal Savings 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 1st Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Federal Savings has no effect on the direction of BTU Metals i.e., BTU Metals and 1st Federal go up and down completely randomly.
Pair Corralation between BTU Metals and 1st Federal
Assuming the 90 days horizon BTU Metals Corp is expected to generate 2.67 times more return on investment than 1st Federal. However, BTU Metals is 2.67 times more volatile than 1st Federal Savings. It trades about 0.22 of its potential returns per unit of risk. 1st Federal Savings is currently generating about 0.24 per unit of risk. If you would invest 1.79 in BTU Metals Corp on October 24, 2024 and sell it today you would earn a total of 0.21 from holding BTU Metals Corp or generate 11.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
BTU Metals Corp vs. 1st Federal Savings
Performance |
| Timeline |
| BTU Metals Corp |
| 1st Federal Savings |
BTU Metals and 1st Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BTU Metals and 1st Federal
The main advantage of trading using opposite BTU Metals and 1st Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTU Metals position performs unexpectedly, 1st Federal 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 1st Federal will offset losses from the drop in 1st Federal's long position.| BTU Metals vs. Griffon | BTU Metals vs. Cementos Pacasmayo SAA | BTU Metals vs. Parker Hannifin | BTU Metals vs. Ainsworth Game Technology |
| 1st Federal vs. Hafnia Limited | 1st Federal vs. Norfolk Southern | 1st Federal vs. United Airlines Holdings | 1st Federal vs. Mesa Air Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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