Correlation Between Perseus Mining and S A P

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

Diversification Opportunities for Perseus Mining and S A P

0.08

Correlation Coefficient

Perseus Mining  S A P

Significant diversification

The 3 months correlation between Perseus and SAP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Perseus Mining i.e., Perseus Mining and S A P go up and down completely randomly.

Pair Corralation between Perseus Mining and S A P

Assuming the 90 days horizon Perseus Mining Limited is expected to under-perform the S A P. In addition to that, Perseus Mining is 1.83 times more volatile than SAP SE. It trades about -0.15 of its total potential returns per unit of risk. SAP SE is currently generating about 0.18 per unit of volatility. If you would invest  22,590  in SAP SE on September 23, 2024 and sell it today you would earn a total of  1,085  from holding SAP SE or generate 4.8% 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.  SAP SE

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.

SAP SE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, S A P unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perseus Mining and S A P

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

The idea behind Perseus Mining Limited and SAP SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.