Correlation Between Perseus Mining and Japan Tobacco

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

Diversification Opportunities for Perseus Mining and Japan Tobacco

0.23

Correlation Coefficient

Perseus Mining  Japan Tobacco

Modest diversification

The 3 months correlation between Perseus and Japan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco ADR has no effect on the direction of Perseus Mining i.e., Perseus Mining and Japan Tobacco go up and down completely randomly.

Pair Corralation between Perseus Mining and Japan Tobacco

Assuming the 90 days horizon Perseus Mining Limited is expected to generate 1.79 times more return on investment than Japan Tobacco. However, Perseus Mining is 1.79 times more volatile than Japan Tobacco ADR. It trades about 0.09 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about -0.25 per unit of risk. If you would invest  163.00  in Perseus Mining Limited on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Perseus Mining Limited or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Perseus Mining Limited  vs.  Japan Tobacco ADR

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Japan Tobacco ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Perseus Mining and Japan Tobacco

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

The idea behind Perseus Mining Limited and Japan Tobacco ADR 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.