Correlation Between Perseus Mining and Japan Tobacco

Can any of the company-specific risk be diversified away by investing in both Perseus Mining and Japan Tobacco 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 Japan Tobacco 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 Japan Tobacco, you can compare the effects of market volatilities on Perseus Mining and Japan Tobacco 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 Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perseus Mining and Japan Tobacco.

Diversification Opportunities for Perseus Mining and Japan Tobacco

-0.2

Correlation Coefficient

Perseus Mining  Japan Tobacco

Good diversification

The 3 months correlation between Perseus and Japan is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Perseus Mining i.e., Perseus Mining and Japan Tobacco go up and down completely randomly.

Pair Corralation between Perseus Mining and Japan Tobacco

Assuming the 90 days horizon Perseus Mining Limited is expected to generate 1.46 times more return on investment than Japan Tobacco. However, Perseus Mining is 1.46 times more volatile than Japan Tobacco. It trades about 0.04 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.01 per unit of risk. If you would invest  139.00  in Perseus Mining Limited on September 29, 2024 and sell it today you would earn a total of  14.00  from holding Perseus Mining Limited or generate 10.07% return on investment over 90 days.

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

Perseus Mining Limited  vs.  Japan Tobacco

Perseus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perseus Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Japan Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Perseus Mining and Japan Tobacco

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

The idea behind Perseus Mining Limited and Japan Tobacco 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.