Correlation Between Prosus NV and Meta Platforms

Can any of the company-specific risk be diversified away by investing in both Prosus NV and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prosus NV and Meta Platforms, you can compare the effects of market volatilities on Prosus NV and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus NV and Meta Platforms.

Diversification Opportunities for Prosus NV and Meta Platforms

-0.07

Correlation Coefficient

Prosus NV  Meta Platforms

Good diversification

The 3 months correlation between Prosus and Meta is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Prosus NV i.e., Prosus NV and Meta Platforms go up and down completely randomly.

Pair Corralation between Prosus NV and Meta Platforms

Assuming the 90 days horizon Prosus NV is expected to generate 1.06 times more return on investment than Meta Platforms. However, Prosus NV is 1.06 times more volatile than Meta Platforms. It trades about 0.08 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.02 per unit of risk. If you would invest  3,852  in Prosus NV on December 30, 2024 and sell it today you would earn a total of  428.00  from holding Prosus NV or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Prosus NV  vs.  Meta Platforms

Prosus NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosus NV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Meta Platforms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Meta Platforms is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prosus NV and Meta Platforms

The main advantage of trading using opposite Prosus NV and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.

The idea behind Prosus NV and Meta Platforms 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.