Correlation Between Perseus Mining and Big 5

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

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

Diversification Opportunities for Perseus Mining and Big 5

0.01

Correlation Coefficient

Perseus Mining  Big 5

Significant diversification

The 3 months correlation between Perseus and Big is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Perseus Mining 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 Perseus Mining Limited are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Perseus Mining i.e., Perseus Mining and Big 5 go up and down completely randomly.

Pair Corralation between Perseus Mining and Big 5

Assuming the 90 days horizon Perseus Mining is expected to generate 18.3 times less return on investment than Big 5. But when comparing it to its historical volatility, Perseus Mining Limited is 3.07 times less risky than Big 5. It trades about 0.02 of its potential returns per unit of risk. Big 5 Sporting is currently generating about 0.12 of returns per unit of risk over similar time horizon. 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

Perseus Mining Limited  vs.  Big 5 Sporting

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.

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.

Pair Trading with Perseus Mining and Big 5

The main advantage of trading using opposite Perseus Mining and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perseus Mining position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Perseus Mining Limited and Big 5 Sporting 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..