Correlation Between JSE and Prosus NV
Can any of the company-specific risk be diversified away by investing in both JSE 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 JSE and Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JSE Limited and Prosus NV, you can compare the effects of market volatilities on JSE 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 JSE with a short position of Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSE and Prosus NV.
Diversification Opportunities for JSE and Prosus NV
Poor diversification
The 3 months correlation between JSE and Prosus is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding JSE Limited and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and JSE 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 JSE Limited 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 JSE i.e., JSE and Prosus NV go up and down completely randomly.
Pair Corralation between JSE and Prosus NV
Assuming the 90 days trading horizon JSE Limited is expected to generate 1.11 times more return on investment than Prosus NV. However, JSE is 1.11 times more volatile than Prosus NV. It trades about -0.2 of its potential returns per unit of risk. Prosus NV is currently generating about -0.22 per unit of risk. If you would invest 1,249,400 in JSE Limited on August 30, 2024 and sell it today you would lose (69,400) from holding JSE Limited or give up 5.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JSE Limited vs. Prosus NV
Performance |
| Timeline |
| JSE Limited |
| Prosus NV |
JSE and Prosus NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JSE and Prosus NV
The main advantage of trading using opposite JSE and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSE 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.| JSE vs. British American Tobacco | JSE vs. Anglo American PLC | JSE vs. Anglo American Platinum | JSE vs. ABSA Bank Limited |
| Prosus NV vs. Sasol Ltd Bee | Prosus NV vs. Centaur Bci Balanced | Prosus NV vs. Sabvest Capital | Prosus NV vs. Growthpoint Properties |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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