Correlation Between New Pacific and Perpetua Resources

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

By analyzing existing cross correlation between New Pacific Metals and Perpetua Resources Corp, you can compare the effects of market volatilities on New Pacific and Perpetua Resources 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 New Pacific with a short position of Perpetua Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Pacific and Perpetua Resources.

Diversification Opportunities for New Pacific and Perpetua Resources

0.78

Correlation Coefficient

New Pacific  Perpetua Resources

Poor diversification

The 3 months correlation between New and Perpetua is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding New Pacific Metals and Perpetua Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perpetua Resources Corp and New Pacific 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 New Pacific Metals are associated (or correlated) with Perpetua Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perpetua Resources Corp has no effect on the direction of New Pacific i.e., New Pacific and Perpetua Resources go up and down completely randomly.

Pair Corralation between New Pacific and Perpetua Resources

Given the investment horizon of 90 days New Pacific Metals is expected to under-perform the Perpetua Resources. But the stock apears to be less risky and, when comparing its historical volatility, New Pacific Metals is 1.46 times less risky than Perpetua Resources. The stock trades about -0.24 of its potential returns per unit of risk. The Perpetua Resources Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,021  in Perpetua Resources Corp on August 31, 2024 and sell it today you would lose (66.50) from holding Perpetua Resources Corp or give up 6.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

New Pacific Metals  vs.  Perpetua Resources Corp

New Pacific Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Pacific Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, New Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Perpetua Resources Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perpetua Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Perpetua Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Pacific and Perpetua Resources

The main advantage of trading using opposite New Pacific and Perpetua Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Pacific position performs unexpectedly, Perpetua Resources 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 Perpetua Resources will offset losses from the drop in Perpetua Resources' long position.

The idea behind New Pacific Metals and Perpetua Resources Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.