Correlation Between Pan American and Perseus Mining

Can any of the company-specific risk be diversified away by investing in both Pan American and Perseus Mining 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 Pan American and Perseus Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pan American Silver and Perseus Mining, you can compare the effects of market volatilities on Pan American and Perseus Mining 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 Pan American with a short position of Perseus Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Perseus Mining.

Diversification Opportunities for Pan American and Perseus Mining

-0.06

Correlation Coefficient

Pan American  Perseus Mining

Good diversification

The 3 months correlation between Pan and Perseus is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Perseus Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Pan American 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 Pan American Silver are associated (or correlated) with Perseus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perseus Mining has no effect on the direction of Pan American i.e., Pan American and Perseus Mining go up and down completely randomly.

Pair Corralation between Pan American and Perseus Mining

Assuming the 90 days trading horizon Pan American Silver is expected to under-perform the Perseus Mining. In addition to that, Pan American is 1.4 times more volatile than Perseus Mining. It trades about -0.09 of its total potential returns per unit of risk. Perseus Mining is currently generating about -0.1 per unit of volatility. If you would invest  247.00  in Perseus Mining on October 6, 2024 and sell it today you would lose (11.00) from holding Perseus Mining or give up 4.45% of portfolio value over 90 days.

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

Pan American Silver  vs.  Perseus Mining

Pan American Silver

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Pan American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Perseus Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Perseus Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan American and Perseus Mining

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

The idea behind Pan American Silver and Perseus Mining 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.