Correlation Between Magnite and Perseus Mining

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

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

Diversification Opportunities for Magnite and Perseus Mining

-0.6

Correlation Coefficient

Magnite  Perseus Mining

Excellent diversification

The 3 months correlation between Magnite and Perseus is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and Perseus Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Magnite 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 Magnite 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 Magnite i.e., Magnite and Perseus Mining go up and down completely randomly.

Pair Corralation between Magnite and Perseus Mining

Given the investment horizon of 90 days Magnite is expected to generate 1.49 times more return on investment than Perseus Mining. However, Magnite is 1.49 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 0.13 per unit of risk. If you would invest  1,564  in Magnite on September 18, 2024 and sell it today you would earn a total of  93.00  from holding Magnite or generate 5.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Magnite  vs.  Perseus Mining Limited

Magnite

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated 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 Magnite and Perseus Mining

The main advantage of trading using opposite Magnite and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnite 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 Magnite 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.