Correlation Between BTU Metals and Northern Star
Can any of the company-specific risk be diversified away by investing in both BTU Metals and Northern Star 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 Northern Star 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 Northern Star Resources, you can compare the effects of market volatilities on BTU Metals and Northern Star 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 Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTU Metals and Northern Star.
Diversification Opportunities for BTU Metals and Northern Star
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BTU and Northern is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BTU Metals Corp and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources 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 Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of BTU Metals i.e., BTU Metals and Northern Star go up and down completely randomly.
Pair Corralation between BTU Metals and Northern Star
Assuming the 90 days horizon BTU Metals Corp is expected to generate 0.62 times more return on investment than Northern Star. However, BTU Metals Corp is 1.61 times less risky than Northern Star. It trades about 0.21 of its potential returns per unit of risk. Northern Star Resources is currently generating about -0.05 per unit of risk. If you would invest 1.91 in BTU Metals Corp on September 2, 2024 and sell it today you would earn a total of 0.14 from holding BTU Metals Corp or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
BTU Metals Corp vs. Northern Star Resources
Performance |
| Timeline |
| BTU Metals Corp |
| Northern Star Resources |
BTU Metals and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BTU Metals and Northern Star
The main advantage of trading using opposite BTU Metals and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTU Metals position performs unexpectedly, Northern Star 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 Northern Star will offset losses from the drop in Northern Star's long position.| BTU Metals vs. Aurion Resources | BTU Metals vs. Rio2 Limited | BTU Metals vs. Palamina Corp | BTU Metals vs. Grande Portage Resources |
| Northern Star vs. Aurion Resources | Northern Star vs. Rio2 Limited | Northern Star vs. Palamina Corp | Northern Star vs. Grande Portage Resources |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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