Correlation Between Medibank Private and Perseus Mining

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

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

Diversification Opportunities for Medibank Private and Perseus Mining

-0.29

Correlation Coefficient

Medibank Private  Perseus Mining

Very good diversification

The 3 months correlation between Medibank and Perseus is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Perseus Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perseus Mining and Medibank Private 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 Medibank Private 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 Medibank Private i.e., Medibank Private and Perseus Mining go up and down completely randomly.

Pair Corralation between Medibank Private and Perseus Mining

Assuming the 90 days trading horizon Medibank Private is expected to generate 2.21 times less return on investment than Perseus Mining. But when comparing it to its historical volatility, Medibank Private is 2.13 times less risky than Perseus Mining. It trades about 0.05 of its potential returns per unit of risk. Perseus Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Perseus Mining on September 28, 2024 and sell it today you would earn a total of  26.00  from holding Perseus Mining or generate 11.4% return on investment over 90 days.

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

Medibank Private  vs.  Perseus Mining

Medibank Private

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Medibank Private is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Perseus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perseus Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Perseus Mining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Medibank Private and Perseus Mining

The main advantage of trading using opposite Medibank Private and Perseus Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medibank Private 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 Medibank Private and Perseus Mining 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.