Correlation Between TrueCar and Prosus
Can any of the company-specific risk be diversified away by investing in both TrueCar and Prosus 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 TrueCar and Prosus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TrueCar and Prosus, you can compare the effects of market volatilities on TrueCar and Prosus 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 TrueCar with a short position of Prosus. Check out your portfolio center. Please also check ongoing floating volatility patterns of TrueCar and Prosus.
Diversification Opportunities for TrueCar and Prosus
Very weak diversification
The 3 months correlation between TrueCar and Prosus is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus and TrueCar 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 TrueCar are associated (or correlated) with Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of TrueCar i.e., TrueCar and Prosus go up and down completely randomly.
Pair Corralation between TrueCar and Prosus
Given the investment horizon of 90 days TrueCar is expected to generate 1.59 times more return on investment than Prosus. However, TrueCar is 1.59 times more volatile than Prosus. It trades about 0.08 of its potential returns per unit of risk. Prosus is currently generating about 0.05 per unit of risk. If you would invest 183.00 in TrueCar on October 25, 2024 and sell it today you would earn a total of 169.50 from holding TrueCar or generate 92.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TrueCar vs. Prosus
Performance |
| Timeline |
| TrueCar |
| Prosus |
TrueCar and Prosus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TrueCar and Prosus
The main advantage of trading using opposite TrueCar and Prosus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueCar position performs unexpectedly, Prosus 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 will offset losses from the drop in Prosus' long position.The idea behind TrueCar and Prosus 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.| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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