Correlation Between Big 5 and Prosus NV
Can any of the company-specific risk be diversified away by investing in both Big 5 and Prosus NV 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 Big 5 and Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Prosus NV, you can compare the effects of market volatilities on Big 5 and Prosus NV 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 Big 5 with a short position of Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Prosus NV.
Diversification Opportunities for Big 5 and Prosus NV
Good diversification
The 3 months correlation between Big and Prosus is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and Big 5 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 Big 5 Sporting are associated (or correlated) with Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Big 5 i.e., Big 5 and Prosus NV go up and down completely randomly.
Pair Corralation between Big 5 and Prosus NV
Assuming the 90 days horizon Big 5 Sporting is expected to generate 3.67 times more return on investment than Prosus NV. However, Big 5 is 3.67 times more volatile than Prosus NV. It trades about 0.12 of its potential returns per unit of risk. Prosus NV is currently generating about -0.08 per unit of risk. If you would invest 144.00 in Big 5 Sporting on September 2, 2024 and sell it today you would earn a total of 13.00 from holding Big 5 Sporting or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Prosus NV
Performance |
| Timeline |
| Big 5 Sporting |
| Prosus NV |
Big 5 and Prosus NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Prosus NV
The main advantage of trading using opposite Big 5 and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Prosus NV 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 Prosus NV will offset losses from the drop in Prosus NV's long position.The idea behind Big 5 Sporting and Prosus NV 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.| Prosus NV vs. SPORT LISBOA E | Prosus NV vs. Gaztransport Technigaz SA | Prosus NV vs. Big 5 Sporting | Prosus NV vs. USWE SPORTS AB |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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