Correlation Between Premier African and Fresnillo PLC
Can any of the company-specific risk be diversified away by investing in both Premier African and Fresnillo PLC 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 Premier African and Fresnillo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier African Minerals and Fresnillo PLC, you can compare the effects of market volatilities on Premier African and Fresnillo PLC 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 Premier African with a short position of Fresnillo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier African and Fresnillo PLC.
Diversification Opportunities for Premier African and Fresnillo PLC
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Premier and Fresnillo is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals and Fresnillo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresnillo PLC and Premier African 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 Premier African Minerals are associated (or correlated) with Fresnillo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresnillo PLC has no effect on the direction of Premier African i.e., Premier African and Fresnillo PLC go up and down completely randomly.
Pair Corralation between Premier African and Fresnillo PLC
Assuming the 90 days trading horizon Premier African Minerals is expected to under-perform the Fresnillo PLC. In addition to that, Premier African is 1.62 times more volatile than Fresnillo PLC. It trades about -0.2 of its total potential returns per unit of risk. Fresnillo PLC is currently generating about -0.3 per unit of volatility. If you would invest 75,300 in Fresnillo PLC on August 28, 2024 and sell it today you would lose (12,000) from holding Fresnillo PLC or give up 15.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier African Minerals vs. Fresnillo PLC
Performance |
| Timeline |
| Premier African Minerals |
| Fresnillo PLC |
Premier African and Fresnillo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier African and Fresnillo PLC
The main advantage of trading using opposite Premier African and Fresnillo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier African position performs unexpectedly, Fresnillo PLC 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 Fresnillo PLC will offset losses from the drop in Fresnillo PLC's long position.| Premier African vs. Givaudan SA | Premier African vs. Antofagasta PLC | Premier African vs. Centamin PLC | Premier African vs. Atalaya Mining |
| Fresnillo PLC vs. Givaudan SA | Fresnillo PLC vs. Antofagasta PLC | Fresnillo PLC vs. Centamin PLC | Fresnillo PLC vs. Atalaya Mining |
Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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