Correlation Between Cameco Corp and Denison Mines

Can any of the company-specific risk be diversified away by investing in both Cameco Corp and Denison Mines 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 Cameco Corp and Denison Mines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cameco Corp and Denison Mines Corp, you can compare the effects of market volatilities on Cameco Corp and Denison Mines 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 Cameco Corp with a short position of Denison Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cameco Corp and Denison Mines.

Diversification Opportunities for Cameco Corp and Denison Mines

0.88

Correlation Coefficient

Cameco Corp  Denison Mines

Very poor diversification

The 3 months correlation between Cameco and Denison is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cameco Corp and Denison Mines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denison Mines Corp and Cameco Corp 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 Cameco Corp are associated (or correlated) with Denison Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denison Mines Corp has no effect on the direction of Cameco Corp i.e., Cameco Corp and Denison Mines go up and down completely randomly.

Pair Corralation between Cameco Corp and Denison Mines

Considering the 90-day investment horizon Cameco Corp is expected to generate 1.02 times more return on investment than Denison Mines. However, Cameco Corp is 1.02 times more volatile than Denison Mines Corp. It trades about 0.26 of its potential returns per unit of risk. Denison Mines Corp is currently generating about 0.09 per unit of risk. If you would invest  4,198  in Cameco Corp on January 20, 2024 and sell it today you would earn a total of  619.00  from holding Cameco Corp or generate 14.75% return on investment over 90 days.

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

Cameco Corp  vs.  Denison Mines Corp

Cameco Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cameco Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Cameco Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Denison Mines Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Denison Mines Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Denison Mines may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Cameco Corp and Denison Mines

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

The idea behind Cameco Corp and Denison Mines 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.