Correlation Between Perseus Mining and Australian Foundation

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

By analyzing existing cross correlation between Perseus Mining and Australian Foundation Investment, you can compare the effects of market volatilities on Perseus Mining and Australian Foundation 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 Australian Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perseus Mining and Australian Foundation.

Diversification Opportunities for Perseus Mining and Australian Foundation

-0.44

Correlation Coefficient

Perseus Mining  Australian Foundation

Very good diversification

The 3 months correlation between Perseus and Australian is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining and Australian Foundation Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Foundation 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 are associated (or correlated) with Australian Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Foundation has no effect on the direction of Perseus Mining i.e., Perseus Mining and Australian Foundation go up and down completely randomly.

Pair Corralation between Perseus Mining and Australian Foundation

Assuming the 90 days trading horizon Perseus Mining is expected to generate 3.7 times more return on investment than Australian Foundation. However, Perseus Mining is 3.7 times more volatile than Australian Foundation Investment. It trades about 0.19 of its potential returns per unit of risk. Australian Foundation Investment is currently generating about -0.03 per unit of risk. If you would invest  257.00  in Perseus Mining on December 23, 2024 and sell it today you would earn a total of  61.00  from holding Perseus Mining or generate 23.74% return on investment over 90 days.

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

Perseus Mining  vs.  Australian Foundation Investme

Perseus Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Perseus Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Australian Foundation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Australian Foundation Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Australian Foundation is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Perseus Mining and Australian Foundation

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

The idea behind Perseus Mining and Australian Foundation Investment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.