Correlation Between SMA Solar and Perseus Mining

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

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

Diversification Opportunities for SMA Solar and Perseus Mining

0.51

Correlation Coefficient

SMA Solar  Perseus Mining

Very weak diversification

The 3 months correlation between SMA and Perseus is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Perseus Mining go up and down completely randomly.

Pair Corralation between SMA Solar and Perseus Mining

Assuming the 90 days horizon SMA Solar Technology is expected to generate 2.77 times more return on investment than Perseus Mining. However, SMA Solar is 2.77 times more volatile than Perseus Mining Limited. It trades about 0.18 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.15 per unit of risk. If you would invest  1,413  in SMA Solar Technology on December 21, 2024 and sell it today you would earn a total of  1,015  from holding SMA Solar Technology or generate 71.83% return on investment over 90 days.

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

SMA Solar Technology  vs.  Perseus Mining Limited

SMA Solar Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SMA Solar reported solid returns over the last few months and may actually be approaching a breakup point.

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 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Perseus Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMA Solar and Perseus Mining

The main advantage of trading using opposite SMA Solar and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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 SMA Solar Technology and Perseus Mining Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.