Correlation Between Alphabet and Prosus NV

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

By analyzing existing cross correlation between Alphabet Class A and Prosus NV, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Prosus NV.

Diversification Opportunities for Alphabet and Prosus NV

-0.8

Correlation Coefficient

Alphabet  Prosus NV

Pay attention - limited upside

The 3 months correlation between Alphabet and Prosus is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Class A and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and Alphabet 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 Alphabet Class A 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 has no effect on the direction of Alphabet i.e., Alphabet and Prosus NV go up and down completely randomly.

Pair Corralation between Alphabet and Prosus NV

Assuming the 90 days trading horizon Alphabet Class A is expected to under-perform the Prosus NV. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Class A is 1.27 times less risky than Prosus NV. The stock trades about -0.18 of its potential returns per unit of risk. The Prosus NV is currently generating about 0.08 of returns per unit of risk over similar time horizon. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Alphabet Class A  vs.  Prosus NV

Alphabet Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Alphabet and Prosus NV

The main advantage of trading using opposite Alphabet and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Class A and Prosus NV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.