Correlation Between Perseus Mining and CF Industries

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

Diversification Opportunities for Perseus Mining and CF Industries

-0.64

Correlation Coefficient

Perseus Mining  CF Industries

Excellent diversification

The 3 months correlation between Perseus and CF Industries is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Perseus Mining i.e., Perseus Mining and CF Industries go up and down completely randomly.

Pair Corralation between Perseus Mining and CF Industries

Assuming the 90 days horizon Perseus Mining Limited is expected to generate 0.95 times more return on investment than CF Industries. However, Perseus Mining Limited is 1.06 times less risky than CF Industries. It trades about 0.2 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.05 per unit of risk. If you would invest  156.00  in Perseus Mining Limited on December 22, 2024 and sell it today you would earn a total of  45.00  from holding Perseus Mining Limited or generate 28.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

Perseus Mining Limited  vs.  CF Industries Holdings

Perseus Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Perseus Mining reported solid returns over the last few months and may actually be approaching a breakup point.

CF Industries Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Perseus Mining and CF Industries

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

The idea behind Perseus Mining Limited and CF Industries 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.