Correlation Between Perseus Mining and Gear Energy

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

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

Diversification Opportunities for Perseus Mining and Gear Energy

0.14

Correlation Coefficient

Perseus Mining  Gear Energy

Average diversification

The 3 months correlation between Perseus and Gear is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and Perseus Mining 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 Perseus Mining Limited are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of Perseus Mining i.e., Perseus Mining and Gear Energy go up and down completely randomly.

Pair Corralation between Perseus Mining and Gear Energy

Assuming the 90 days horizon Perseus Mining Limited is expected to generate 0.49 times more return on investment than Gear Energy. However, Perseus Mining Limited is 2.05 times less risky than Gear Energy. It trades about -0.1 of its potential returns per unit of risk. Gear Energy is currently generating about -0.2 per unit of risk. If you would invest  158.00  in Perseus Mining Limited on October 4, 2024 and sell it today you would lose (6.00) from holding Perseus Mining Limited or give up 3.8% of portfolio value over 90 days.

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

Perseus Mining Limited  vs.  Gear Energy

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 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.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Perseus Mining and Gear Energy

The main advantage of trading using opposite Perseus Mining and Gear Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perseus Mining position performs unexpectedly, Gear Energy 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 Gear Energy will offset losses from the drop in Gear Energy's long position.

The idea behind Perseus Mining Limited and Gear Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.