Correlation Between NexGen Energy and Perseus Mining

Can any of the company-specific risk be diversified away by investing in both NexGen Energy and Perseus Mining 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 NexGen Energy and Perseus Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NexGen Energy and Perseus Mining Limited, you can compare the effects of market volatilities on NexGen Energy and Perseus Mining 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 NexGen Energy with a short position of Perseus Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and Perseus Mining.

Diversification Opportunities for NexGen Energy and Perseus Mining

0.25

Correlation Coefficient

NexGen Energy  Perseus Mining

Modest diversification

The 3 months correlation between NexGen and Perseus is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and NexGen Energy 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 NexGen Energy are associated (or correlated) with Perseus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perseus Mining has no effect on the direction of NexGen Energy i.e., NexGen Energy and Perseus Mining go up and down completely randomly.

Pair Corralation between NexGen Energy and Perseus Mining

Assuming the 90 days horizon NexGen Energy is expected to generate 2.4 times more return on investment than Perseus Mining. However, NexGen Energy is 2.4 times more volatile than Perseus Mining Limited. It trades about -0.12 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about -0.31 per unit of risk. If you would invest  785.00  in NexGen Energy on October 8, 2024 and sell it today you would lose (73.00) from holding NexGen Energy or give up 9.3% of portfolio value over 90 days.

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

NexGen Energy  vs.  Perseus Mining Limited

NexGen Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NexGen Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Perseus Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Perseus Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NexGen Energy and Perseus Mining

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

The idea behind NexGen Energy and Perseus Mining Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.