Correlation Between Labrador Gold and Perseus Mining

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

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

Diversification Opportunities for Labrador Gold and Perseus Mining

0.67

Correlation Coefficient

Labrador Gold  Perseus Mining

Poor diversification

The 3 months correlation between Labrador and Perseus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Gold 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 Labrador Gold 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 Labrador Gold 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 Labrador Gold i.e., Labrador Gold and Perseus Mining go up and down completely randomly.

Pair Corralation between Labrador Gold and Perseus Mining

Assuming the 90 days horizon Labrador Gold Corp is expected to under-perform the Perseus Mining. In addition to that, Labrador Gold is 2.33 times more volatile than Perseus Mining Limited. It trades about -0.01 of its total potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.03 per unit of volatility. If you would invest  153.00  in Perseus Mining Limited on October 13, 2024 and sell it today you would earn a total of  7.00  from holding Perseus Mining Limited or generate 4.58% return on investment over 90 days.

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

Labrador Gold Corp  vs.  Perseus Mining Limited

Labrador Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Labrador Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 Labrador Gold and Perseus Mining

The main advantage of trading using opposite Labrador Gold and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Gold 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 Labrador Gold 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.