Correlation Between Perseus Mining and American Rare
Can any of the company-specific risk be diversified away by investing in both Perseus Mining and American Rare 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 American Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Perseus Mining and American Rare Earths, you can compare the effects of market volatilities on Perseus Mining and American Rare 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 American Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perseus Mining and American Rare.
Diversification Opportunities for Perseus Mining and American Rare
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Perseus and American is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths 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 are associated (or correlated) with American Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of Perseus Mining i.e., Perseus Mining and American Rare go up and down completely randomly.
Pair Corralation between Perseus Mining and American Rare
Assuming the 90 days trading horizon Perseus Mining is expected to under-perform the American Rare. But the stock apears to be less risky and, when comparing its historical volatility, Perseus Mining is 1.79 times less risky than American Rare. The stock trades about -0.13 of its potential returns per unit of risk. The American Rare Earths is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 26.00 in American Rare Earths on September 3, 2024 and sell it today you would earn a total of 1.00 from holding American Rare Earths or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Perseus Mining vs. American Rare Earths
Performance |
| Timeline |
| Perseus Mining |
| American Rare Earths |
Perseus Mining and American Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Perseus Mining and American Rare
The main advantage of trading using opposite Perseus Mining and American Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perseus Mining position performs unexpectedly, American Rare 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 American Rare will offset losses from the drop in American Rare's long position.| Perseus Mining vs. Northern Star Resources | Perseus Mining vs. Evolution Mining | Perseus Mining vs. Bluescope Steel | Perseus Mining vs. Aneka Tambang Tbk |
| American Rare vs. Alto Metals | American Rare vs. Ora Banda Mining | American Rare vs. Perseus Mining | American Rare vs. National Storage REIT |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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