Correlation Between Insteel Industries and Perseus Mining

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

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

Diversification Opportunities for Insteel Industries and Perseus Mining

-0.49

Correlation Coefficient

Insteel Industries  Perseus Mining

Very good diversification

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

Pair Corralation between Insteel Industries and Perseus Mining

Given the investment horizon of 90 days Insteel Industries is expected to under-perform the Perseus Mining. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.45 times less risky than Perseus Mining. The stock trades about -0.03 of its potential returns per unit of risk. The Perseus Mining Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Perseus Mining Limited on September 13, 2024 and sell it today you would earn a total of  56.00  from holding Perseus Mining Limited or generate 47.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Insteel Industries  vs.  Perseus Mining Limited

Insteel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Perseus Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Perseus Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Insteel Industries and Perseus Mining

The main advantage of trading using opposite Insteel Industries and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries 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 Insteel Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.