Correlation Between Direct Line and Perseus Mining

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Can any of the company-specific risk be diversified away by investing in both Direct Line 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 Direct Line and Perseus Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Line Insurance and Perseus Mining Limited, you can compare the effects of market volatilities on Direct Line 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 Direct Line with a short position of Perseus Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Perseus Mining.

Diversification Opportunities for Direct Line and Perseus Mining

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Direct and Perseus is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Direct Line 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 Direct Line Insurance 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 Direct Line i.e., Direct Line and Perseus Mining go up and down completely randomly.

Pair Corralation between Direct Line and Perseus Mining

Assuming the 90 days trading horizon Direct Line is expected to generate 1.08 times less return on investment than Perseus Mining. In addition to that, Direct Line is 1.28 times more volatile than Perseus Mining Limited. It trades about 0.04 of its total potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.06 per unit of volatility. If you would invest  138.00  in Perseus Mining Limited on September 1, 2024 and sell it today you would earn a total of  23.00  from holding Perseus Mining Limited or generate 16.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Direct Line Insurance  vs.  Perseus Mining Limited

 Performance 
       Timeline  
Direct Line Insurance 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Direct Line Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Direct Line reported solid returns over the last few months and may actually be approaching a breakup point.
Perseus Mining 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Perseus Mining may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Direct Line and Perseus Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direct Line and Perseus Mining

The main advantage of trading using opposite Direct Line and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line 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 Direct Line Insurance 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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