Correlation Between Centaurus Metals and Perseus Mining

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

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

Diversification Opportunities for Centaurus Metals and Perseus Mining

0.49

Correlation Coefficient

Centaurus Metals  Perseus Mining

Very weak diversification

The 3 months correlation between Centaurus and Perseus is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals and Perseus Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Centaurus 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 Centaurus Metals 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 Centaurus Metals i.e., Centaurus Metals and Perseus Mining go up and down completely randomly.

Pair Corralation between Centaurus Metals and Perseus Mining

Assuming the 90 days trading horizon Centaurus Metals is expected to generate 2.03 times more return on investment than Perseus Mining. However, Centaurus Metals is 2.03 times more volatile than Perseus Mining. It trades about 0.05 of its potential returns per unit of risk. Perseus Mining is currently generating about 0.06 per unit of risk. If you would invest  39.00  in Centaurus Metals on September 5, 2024 and sell it today you would earn a total of  3.00  from holding Centaurus Metals or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Centaurus Metals  vs.  Perseus Mining

Centaurus Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Centaurus Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Perseus Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Perseus Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centaurus Metals and Perseus Mining

The main advantage of trading using opposite Centaurus Metals and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centaurus Metals 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 Centaurus Metals and Perseus Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.