Correlation Between Perseus Mining and United Rentals

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

Diversification Opportunities for Perseus Mining and United Rentals

PerseusUnitedDiversified AwayPerseusUnitedDiversified Away100%
0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Perseus and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Perseus Mining i.e., Perseus Mining and United Rentals go up and down completely randomly.

Pair Corralation between Perseus Mining and United Rentals

Assuming the 90 days horizon Perseus Mining is expected to generate 1.73 times less return on investment than United Rentals. But when comparing it to its historical volatility, Perseus Mining Limited is 1.18 times less risky than United Rentals. It trades about 0.07 of its potential returns per unit of risk. United Rentals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  65,429  in United Rentals on September 13, 2024 and sell it today you would earn a total of  10,991  from holding United Rentals or generate 16.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Perseus Mining Limited  vs.  United Rentals

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 051015202530
JavaScript chart by amCharts 3.21.15P4Q UR3
       Timeline  
Perseus Mining 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Perseus Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1.51.551.61.651.71.751.81.85
United Rentals 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Rentals reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec700720740760780800820840

Perseus Mining and United Rentals Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.98-5.98-3.97-1.970.02.024.146.268.3910.51 0.020.030.040.050.06
JavaScript chart by amCharts 3.21.15P4Q UR3
       Returns  

Pair Trading with Perseus Mining and United Rentals

The main advantage of trading using opposite Perseus Mining and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perseus Mining position performs unexpectedly, United Rentals 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 Rentals will offset losses from the drop in United Rentals' long position.
The idea behind Perseus Mining Limited and United Rentals 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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