Correlation Between MYFAIR GOLD and PROSUS NV

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

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

Diversification Opportunities for MYFAIR GOLD and PROSUS NV

0.73

Correlation Coefficient

MYFAIR GOLD  PROSUS NV

Poor diversification

The 3 months correlation between MYFAIR and PROSUS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MYFAIR GOLD P 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 MYFAIR GOLD 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 MYFAIR GOLD P 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 MYFAIR GOLD i.e., MYFAIR GOLD and PROSUS NV go up and down completely randomly.

Pair Corralation between MYFAIR GOLD and PROSUS NV

Assuming the 90 days horizon MYFAIR GOLD is expected to generate 1.05 times less return on investment than PROSUS NV. In addition to that, MYFAIR GOLD is 1.87 times more volatile than PROSUS NV ADR. It trades about 0.06 of its total potential returns per unit of risk. PROSUS NV ADR is currently generating about 0.11 per unit of volatility. If you would invest  649.00  in PROSUS NV ADR on September 4, 2024 and sell it today you would earn a total of  96.00  from holding PROSUS NV ADR or generate 14.79% return on investment over 90 days.

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

MYFAIR GOLD P  vs.  PROSUS NV ADR

MYFAIR GOLD P

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MYFAIR GOLD P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MYFAIR GOLD reported solid returns over the last few months and may actually be approaching a breakup point.

PROSUS NV ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PROSUS NV ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PROSUS NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MYFAIR GOLD and PROSUS NV

The main advantage of trading using opposite MYFAIR GOLD and PROSUS NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYFAIR GOLD 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 MYFAIR GOLD P 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.