Correlation Between Perseus Mining and ETFS Coffee

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

Diversification Opportunities for Perseus Mining and ETFS Coffee

-0.48

Correlation Coefficient

Perseus Mining  ETFS Coffee

Very good diversification

The 3 months correlation between Perseus and ETFS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC 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 ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of Perseus Mining i.e., Perseus Mining and ETFS Coffee go up and down completely randomly.

Pair Corralation between Perseus Mining and ETFS Coffee

Assuming the 90 days horizon Perseus Mining Limited is expected to under-perform the ETFS Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Perseus Mining Limited is 1.36 times less risky than ETFS Coffee. The stock trades about -0.05 of its potential returns per unit of risk. The ETFS Coffee ETC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,908  in ETFS Coffee ETC on October 7, 2024 and sell it today you would earn a total of  1,273  from holding ETFS Coffee ETC or generate 32.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.31%
Values	Daily Returns

Perseus Mining Limited  vs.  ETFS Coffee ETC

Perseus Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

ETFS Coffee ETC

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ETFS Coffee ETC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perseus Mining and ETFS Coffee

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

The idea behind Perseus Mining Limited and ETFS Coffee ETC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.