Correlation Between MTN Group and Perseus Mining

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

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

Diversification Opportunities for MTN Group and Perseus Mining

0.72

Correlation Coefficient

MTN Group  Perseus Mining

Poor diversification

The 3 months correlation between MTN and Perseus is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Limited and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and MTN Group 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 MTN Group Limited 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 MTN Group i.e., MTN Group and Perseus Mining go up and down completely randomly.

Pair Corralation between MTN Group and Perseus Mining

Assuming the 90 days horizon MTN Group Limited is expected to generate 0.81 times more return on investment than Perseus Mining. However, MTN Group Limited is 1.24 times less risky than Perseus Mining. It trades about 0.03 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.02 per unit of risk. If you would invest  458.00  in MTN Group Limited on October 26, 2024 and sell it today you would earn a total of  32.00  from holding MTN Group Limited or generate 6.99% return on investment over 90 days.

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

MTN Group Limited  vs.  Perseus Mining Limited

MTN Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

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 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 MTN Group and Perseus Mining

The main advantage of trading using opposite MTN Group and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN Group 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 MTN Group Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.