Correlation Between European Residential and Perseus Mining

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

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

Diversification Opportunities for European Residential and Perseus Mining

-0.36

Correlation Coefficient

European Residential  Perseus Mining

Very good diversification

The 3 months correlation between European and Perseus is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Perseus Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and European Residential 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 European Residential Real 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 European Residential i.e., European Residential and Perseus Mining go up and down completely randomly.

Pair Corralation between European Residential and Perseus Mining

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Perseus Mining. In addition to that, European Residential is 2.71 times more volatile than Perseus Mining. It trades about -0.09 of its total potential returns per unit of risk. Perseus Mining is currently generating about 0.09 per unit of volatility. If you would invest  236.00  in Perseus Mining on November 30, 2024 and sell it today you would earn a total of  25.00  from holding Perseus Mining or generate 10.59% return on investment over 90 days.

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

European Residential Real  vs.  Perseus Mining

European Residential Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Residential Real 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Perseus Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Perseus Mining may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with European Residential and Perseus Mining

The main advantage of trading using opposite European Residential and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential 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 European Residential Real 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.