Correlation Between Perseus Mining and INDUSTRIAL MINERALS

Can any of the company-specific risk be diversified away by investing in both Perseus Mining and INDUSTRIAL MINERALS 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 INDUSTRIAL MINERALS 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 INDUSTRIAL MINERALS LTD, you can compare the effects of market volatilities on Perseus Mining and INDUSTRIAL MINERALS 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 INDUSTRIAL MINERALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perseus Mining and INDUSTRIAL MINERALS.

Diversification Opportunities for Perseus Mining and INDUSTRIAL MINERALS

0.13

Correlation Coefficient

Perseus Mining  INDUSTRIAL MINERALS

Average diversification

The 3 months correlation between Perseus and INDUSTRIAL is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and INDUSTRIAL MINERALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDUSTRIAL MINERALS LTD 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 INDUSTRIAL MINERALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDUSTRIAL MINERALS LTD has no effect on the direction of Perseus Mining i.e., Perseus Mining and INDUSTRIAL MINERALS go up and down completely randomly.

Pair Corralation between Perseus Mining and INDUSTRIAL MINERALS

Assuming the 90 days horizon Perseus Mining is expected to generate 1.77 times less return on investment than INDUSTRIAL MINERALS. But when comparing it to its historical volatility, Perseus Mining Limited is 3.86 times less risky than INDUSTRIAL MINERALS. It trades about 0.16 of its potential returns per unit of risk. INDUSTRIAL MINERALS LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.95  in INDUSTRIAL MINERALS LTD on December 22, 2024 and sell it today you would earn a total of  1.40  from holding INDUSTRIAL MINERALS LTD or generate 17.61% return on investment over 90 days.

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

Perseus Mining Limited  vs.  INDUSTRIAL MINERALS LTD

Perseus Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Perseus Mining reported solid returns over the last few months and may actually be approaching a breakup point.

INDUSTRIAL MINERALS LTD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDUSTRIAL MINERALS LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INDUSTRIAL MINERALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perseus Mining and INDUSTRIAL MINERALS

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

The idea behind Perseus Mining Limited and INDUSTRIAL MINERALS LTD 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.