Correlation Between Hello and Prosus NV

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Can any of the company-specific risk be diversified away by investing in both Hello 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 Hello and Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hello Group and Prosus NV ADR, you can compare the effects of market volatilities on Hello 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 Hello with a short position of Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hello and Prosus NV.

Diversification Opportunities for Hello and Prosus NV

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Hello and Prosus is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hello Group and Prosus NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV ADR and Hello 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 Hello Group 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 ADR has no effect on the direction of Hello i.e., Hello and Prosus NV go up and down completely randomly.

Pair Corralation between Hello and Prosus NV

Given the investment horizon of 90 days Hello Group is expected to generate 1.08 times more return on investment than Prosus NV. However, Hello is 1.08 times more volatile than Prosus NV ADR. It trades about -0.04 of its potential returns per unit of risk. Prosus NV ADR is currently generating about -0.25 per unit of risk. If you would invest  739.00  in Hello Group on October 25, 2024 and sell it today you would lose (18.00) from holding Hello Group or give up 2.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hello Group  vs.  Prosus NV ADR

 Performance 
       Timeline  
Hello Group 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Hello Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Hello may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Prosus NV ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Prosus NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hello and Prosus NV Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hello and Prosus NV

The main advantage of trading using opposite Hello and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hello 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 Hello Group and Prosus NV ADR 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.
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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