Correlation Between Perseus Mining and United Airlines

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

Diversification Opportunities for Perseus Mining and United Airlines

-0.16

Correlation Coefficient

Perseus Mining  United Airlines

Good diversification

The 3 months correlation between Perseus and United is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Perseus Mining i.e., Perseus Mining and United Airlines go up and down completely randomly.

Pair Corralation between Perseus Mining and United Airlines

Assuming the 90 days horizon Perseus Mining Limited is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Perseus Mining Limited is 1.43 times less risky than United Airlines. The stock trades about -0.02 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  5,200  in United Airlines Holdings on October 4, 2024 and sell it today you would earn a total of  4,300  from holding United Airlines Holdings or generate 82.69% 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.  United Airlines Holdings

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.

United Airlines Holdings

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perseus Mining and United Airlines

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

The idea behind Perseus Mining Limited and United Airlines Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.