Correlation Between AIRBNB INC and PROSUS NV

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

By analyzing existing cross correlation between AIRBNB INC DL 01 and PROSUS NV ADR, you can compare the effects of market volatilities on AIRBNB INC and PROSUS NV 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 AIRBNB INC with a short position of PROSUS NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIRBNB INC and PROSUS NV.

Diversification Opportunities for AIRBNB INC and PROSUS NV

0.1

Correlation Coefficient

AIRBNB INC  PROSUS NV

Average diversification

The 3 months correlation between AIRBNB and PROSUS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AIRBNB INC DL 01 and PROSUS NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROSUS NV ADR and AIRBNB INC 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 AIRBNB INC DL 01 are associated (or correlated) with PROSUS NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROSUS NV ADR has no effect on the direction of AIRBNB INC i.e., AIRBNB INC and PROSUS NV go up and down completely randomly.

Pair Corralation between AIRBNB INC and PROSUS NV

Assuming the 90 days horizon AIRBNB INC DL 01 is expected to under-perform the PROSUS NV. In addition to that, AIRBNB INC is 1.25 times more volatile than PROSUS NV ADR. It trades about -0.02 of its total potential returns per unit of risk. PROSUS NV ADR is currently generating about 0.08 per unit of volatility. If you would invest  755.00  in PROSUS NV ADR on December 29, 2024 and sell it today you would earn a total of  90.00  from holding PROSUS NV ADR or generate 11.92% return on investment over 90 days.

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

AIRBNB INC DL 01  vs.  PROSUS NV ADR

AIRBNB INC DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIRBNB INC DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AIRBNB INC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PROSUS NV ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PROSUS NV ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PROSUS NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIRBNB INC and PROSUS NV

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

The idea behind AIRBNB INC DL 01 and PROSUS NV ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.