Correlation Between ESH Acquisition and Perseus Mining

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

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

Diversification Opportunities for ESH Acquisition and Perseus Mining

-0.19

Correlation Coefficient

ESH Acquisition  Perseus Mining

Good diversification

The 3 months correlation between ESH and Perseus is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ESH Acquisition Corp and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and ESH Acquisition 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 ESH Acquisition Corp 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 ESH Acquisition i.e., ESH Acquisition and Perseus Mining go up and down completely randomly.

Pair Corralation between ESH Acquisition and Perseus Mining

Given the investment horizon of 90 days ESH Acquisition is expected to generate 7.81 times less return on investment than Perseus Mining. But when comparing it to its historical volatility, ESH Acquisition Corp is 13.89 times less risky than Perseus Mining. It trades about 0.1 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Perseus Mining Limited on September 21, 2024 and sell it today you would earn a total of  48.00  from holding Perseus Mining Limited or generate 41.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

ESH Acquisition Corp  vs.  Perseus Mining Limited

ESH Acquisition Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Perseus Mining

Risk-Adjusted Performance

0 of 100

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 weak 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 ESH Acquisition and Perseus Mining

The main advantage of trading using opposite ESH Acquisition and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESH Acquisition 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 ESH Acquisition Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.