Correlation Between Estee Lauder and Perseus Mining

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

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

Diversification Opportunities for Estee Lauder and Perseus Mining

0.4

Correlation Coefficient

Estee Lauder  Perseus Mining

Very weak diversification

The 3 months correlation between Estee and Perseus is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Estee Lauder 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 Estee Lauder Companies 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 Estee Lauder i.e., Estee Lauder and Perseus Mining go up and down completely randomly.

Pair Corralation between Estee Lauder and Perseus Mining

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Perseus Mining. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.05 times less risky than Perseus Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Perseus Mining Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Perseus Mining Limited on October 4, 2024 and sell it today you would earn a total of  48.00  from holding Perseus Mining Limited or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.68%
Values	Daily Returns

Estee Lauder Companies  vs.  Perseus Mining Limited

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Perseus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perseus Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Estee Lauder and Perseus Mining

The main advantage of trading using opposite Estee Lauder and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder 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 Estee Lauder Companies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.