Correlation Between Gold Fields and Perseus Mining

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

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

Diversification Opportunities for Gold Fields and Perseus Mining

0.86

Correlation Coefficient

Gold Fields  Perseus Mining

Very poor diversification

The 3 months correlation between Gold and Perseus is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and Perseus Mining go up and down completely randomly.

Pair Corralation between Gold Fields and Perseus Mining

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.84 times more return on investment than Perseus Mining. However, Gold Fields Ltd is 1.19 times less risky than Perseus Mining. It trades about 0.05 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  1,358  in Gold Fields Ltd on September 2, 2024 and sell it today you would earn a total of  91.00  from holding Gold Fields Ltd or generate 6.7% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Perseus Mining Limited

Gold Fields

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Gold Fields and Perseus Mining

The main advantage of trading using opposite Gold Fields and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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 Gold Fields Ltd 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.