Correlation Between US GoldMining and Perseus Mining

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

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

Diversification Opportunities for US GoldMining and Perseus Mining

0.56

Correlation Coefficient

US GoldMining  Perseus Mining

Very weak diversification

The 3 months correlation between USGO and Perseus is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding US GoldMining Common and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and US GoldMining 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 US GoldMining Common 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 US GoldMining i.e., US GoldMining and Perseus Mining go up and down completely randomly.

Pair Corralation between US GoldMining and Perseus Mining

Given the investment horizon of 90 days US GoldMining Common is expected to under-perform the Perseus Mining. In addition to that, US GoldMining is 1.61 times more volatile than Perseus Mining Limited. It trades about -0.01 of its total potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.02 per unit of volatility. If you would invest  143.00  in Perseus Mining Limited on January 28, 2024 and sell it today you would earn a total of  2.00  from holding Perseus Mining Limited or generate 1.4% return on investment over 90 days.

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

US GoldMining Common  vs.  Perseus Mining Limited

US GoldMining Common

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US GoldMining Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, US GoldMining displayed solid returns over the last few months and may actually be approaching a breakup point.

Perseus Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Perseus Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US GoldMining and Perseus Mining

The main advantage of trading using opposite US GoldMining and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US GoldMining 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 US GoldMining Common 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.