Correlation Between Perseus Mining and Timken

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

Diversification Opportunities for Perseus Mining and Timken

0.65

Correlation Coefficient

Perseus Mining  Timken

Poor diversification

The 3 months correlation between Perseus and Timken is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Perseus Mining i.e., Perseus Mining and Timken go up and down completely randomly.

Pair Corralation between Perseus Mining and Timken

Assuming the 90 days horizon Perseus Mining Limited is expected to generate 1.19 times more return on investment than Timken. However, Perseus Mining is 1.19 times more volatile than Timken Company. It trades about 0.02 of its potential returns per unit of risk. Timken Company is currently generating about -0.03 per unit of risk. If you would invest  172.00  in Perseus Mining Limited on September 15, 2024 and sell it today you would earn a total of  2.00  from holding Perseus Mining Limited or generate 1.16% return on investment over 90 days.

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

Perseus Mining Limited  vs.  Timken Company

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.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Perseus Mining and Timken

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

The idea behind Perseus Mining Limited and Timken Company 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.