Correlation Between Prosus NV and Netcare
Can any of the company-specific risk be diversified away by investing in both Prosus NV and Netcare 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 NV and Netcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus NV and Netcare, you can compare the effects of market volatilities on Prosus NV and Netcare 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 NV with a short position of Netcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus NV and Netcare.
Diversification Opportunities for Prosus NV and Netcare
Very poor diversification
The 3 months correlation between Prosus and Netcare is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and Netcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcare and Prosus NV 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 NV are associated (or correlated) with Netcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcare has no effect on the direction of Prosus NV i.e., Prosus NV and Netcare go up and down completely randomly.
Pair Corralation between Prosus NV and Netcare
Assuming the 90 days trading horizon Prosus NV is expected to generate 1.43 times more return on investment than Netcare. However, Prosus NV is 1.43 times more volatile than Netcare. It trades about 0.03 of its potential returns per unit of risk. Netcare is currently generating about 0.02 per unit of risk. If you would invest 5,994,918 in Prosus NV on August 28, 2024 and sell it today you would earn a total of 1,215,082 from holding Prosus NV or generate 20.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosus NV vs. Netcare
Performance |
| Timeline |
| Prosus NV |
| Netcare |
Prosus NV and Netcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus NV and Netcare
The main advantage of trading using opposite Prosus NV and Netcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV position performs unexpectedly, Netcare 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 Netcare will offset losses from the drop in Netcare's long position.| Prosus NV vs. Life Healthcare | Prosus NV vs. RCL Foods | Prosus NV vs. Trematon Capital Investments | Prosus NV vs. Frontier Transport Holdings |
| Netcare vs. Frontier Transport Holdings | Netcare vs. Astoria Investments | Netcare vs. Safari Investments RSA | Netcare vs. Zeder Investments |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |