Correlation Between Perseus Mining and Oracle Power

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

Diversification Opportunities for Perseus Mining and Oracle Power

-0.39

Correlation Coefficient

Perseus Mining  Oracle Power

Very good diversification

The 3 months correlation between Perseus and Oracle is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and Oracle Power plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Power plc 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 Oracle Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Power plc has no effect on the direction of Perseus Mining i.e., Perseus Mining and Oracle Power go up and down completely randomly.

Pair Corralation between Perseus Mining and Oracle Power

Assuming the 90 days horizon Perseus Mining is expected to generate 2.66 times less return on investment than Oracle Power. But when comparing it to its historical volatility, Perseus Mining Limited is 6.91 times less risky than Oracle Power. It trades about 0.15 of its potential returns per unit of risk. Oracle Power plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Oracle Power plc on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Oracle Power plc or generate 0.0% return on investment over 90 days.

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

Perseus Mining Limited  vs.  Oracle Power plc

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 11 (%) 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.

Oracle Power plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle Power plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Oracle Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perseus Mining and Oracle Power

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

The idea behind Perseus Mining Limited and Oracle Power plc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.