Correlation Between Prosus and Naspers
Can any of the company-specific risk be diversified away by investing in both Prosus and Naspers 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 Prosus and Naspers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus and Naspers Ltd ADR, you can compare the effects of market volatilities on Prosus and Naspers 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 Prosus with a short position of Naspers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus and Naspers.
Diversification Opportunities for Prosus and Naspers
Very good diversification
The 3 months correlation between Prosus and Naspers is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Prosus and Naspers Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Ltd ADR and Prosus 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 Prosus are associated (or correlated) with Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Ltd ADR has no effect on the direction of Prosus i.e., Prosus and Naspers go up and down completely randomly.
Pair Corralation between Prosus and Naspers
Assuming the 90 days horizon Prosus is expected to generate 1.15 times less return on investment than Naspers. In addition to that, Prosus is 2.51 times more volatile than Naspers Ltd ADR. It trades about 0.01 of its total potential returns per unit of risk. Naspers Ltd ADR is currently generating about 0.04 per unit of volatility. If you would invest 3,286 in Naspers Ltd ADR on September 3, 2024 and sell it today you would earn a total of 326.00 from holding Naspers Ltd ADR or generate 9.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 30.71% |
| Values | Daily Returns |
Prosus vs. Naspers Ltd ADR
Performance |
| Timeline |
| Prosus |
| Naspers Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Prosus and Naspers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus and Naspers
The main advantage of trading using opposite Prosus and Naspers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus position performs unexpectedly, Naspers 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 Naspers will offset losses from the drop in Naspers' long position.| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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