Correlation Between Big 5 and Perseus Mining

Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Perseus Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and Perseus Mining Limited, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Perseus Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Perseus Mining.

Diversification Opportunities for Big 5 and Perseus Mining

0.01

Correlation Coefficient

Big 5  Perseus Mining

Significant diversification

The 3 months correlation between Big and Perseus is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Perseus Mining go up and down completely randomly.

Pair Corralation between Big 5 and Perseus Mining

Assuming the 90 days horizon Big 5 Sporting is expected to generate 3.07 times more return on investment than Perseus Mining. However, Big 5 is 3.07 times more volatile than Perseus Mining Limited. It trades about 0.12 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.02 per unit of risk. If you would invest  162.00  in Big 5 Sporting on September 20, 2024 and sell it today you would earn a total of  72.00  from holding Big 5 Sporting or generate 44.44% return on investment over 90 days.

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

Big 5 Sporting  vs.  Perseus Mining Limited

Big 5 Sporting

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Big 5 reported solid returns over the last few months and may actually be approaching a breakup point.

Perseus Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Perseus Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Big 5 and Perseus Mining

The main advantage of trading using opposite Big 5 and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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 Big 5 Sporting 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.