Correlation Between Prosus and Sabio Holdings
Can any of the company-specific risk be diversified away by investing in both Prosus and Sabio Holdings 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 Sabio Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus and Sabio Holdings, you can compare the effects of market volatilities on Prosus and Sabio Holdings 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 Sabio Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus and Sabio Holdings.
Diversification Opportunities for Prosus and Sabio Holdings
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prosus and Sabio is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Prosus and Sabio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabio Holdings 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 Sabio Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabio Holdings has no effect on the direction of Prosus i.e., Prosus and Sabio Holdings go up and down completely randomly.
Pair Corralation between Prosus and Sabio Holdings
Assuming the 90 days horizon Prosus is expected to generate 4.2 times less return on investment than Sabio Holdings. But when comparing it to its historical volatility, Prosus is 2.94 times less risky than Sabio Holdings. It trades about 0.05 of its potential returns per unit of risk. Sabio Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Sabio Holdings on August 24, 2024 and sell it today you would earn a total of 19.00 from holding Sabio Holdings or generate 95.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosus vs. Sabio Holdings
Performance |
| Timeline |
| Prosus |
| Sabio Holdings |
Prosus and Sabio Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus and Sabio Holdings
The main advantage of trading using opposite Prosus and Sabio Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus position performs unexpectedly, Sabio Holdings 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 Sabio Holdings will offset losses from the drop in Sabio Holdings' long position.| Prosus vs. Tencent Holdings | Prosus vs. Trivago NV | Prosus vs. YY Inc Class | Prosus vs. DouYu International Holdings |
| Sabio Holdings vs. Tencent Holdings | Sabio Holdings vs. Trivago NV | Sabio Holdings vs. YY Inc Class | Sabio Holdings vs. DouYu International Holdings |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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