Correlation Between Perseus Mining and Rea

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

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

Diversification Opportunities for Perseus Mining and Rea

0.25

Correlation Coefficient

Perseus Mining  Rea

Modest diversification

The 3 months correlation between Perseus and Rea is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea Group 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 Rea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of Perseus Mining i.e., Perseus Mining and Rea go up and down completely randomly.

Pair Corralation between Perseus Mining and Rea

Assuming the 90 days trading horizon Perseus Mining is expected to generate 1.4 times less return on investment than Rea. In addition to that, Perseus Mining is 1.48 times more volatile than Rea Group. It trades about 0.04 of its total potential returns per unit of risk. Rea Group is currently generating about 0.09 per unit of volatility. If you would invest  12,472  in Rea Group on December 4, 2024 and sell it today you would earn a total of  11,940  from holding Rea Group or generate 95.73% 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  vs.  Rea Group

Perseus Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining are ranked lower than 9 (%) 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.

Rea Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rea Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rea 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 Rea

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

The idea behind Perseus Mining and Rea Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.