Correlation Between Bowler Metcalf and Naspers

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

By analyzing existing cross correlation between Bowler Metcalf and Naspers Limited, you can compare the effects of market volatilities on Bowler Metcalf and Naspers 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 Bowler Metcalf with a short position of Naspers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bowler Metcalf and Naspers.

Diversification Opportunities for Bowler Metcalf and Naspers

0.03

Correlation Coefficient

Bowler Metcalf  Naspers

Significant diversification

The 3 months correlation between Bowler and Naspers is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bowler Metcalf and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited and Bowler Metcalf 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 Bowler Metcalf are associated (or correlated) with Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Bowler Metcalf i.e., Bowler Metcalf and Naspers go up and down completely randomly.

Pair Corralation between Bowler Metcalf and Naspers

Assuming the 90 days trading horizon Bowler Metcalf is expected to generate 2.95 times more return on investment than Naspers. However, Bowler Metcalf is 2.95 times more volatile than Naspers Limited. It trades about 0.05 of its potential returns per unit of risk. Naspers Limited is currently generating about 0.08 per unit of risk. If you would invest  95,000  in Bowler Metcalf on September 24, 2024 and sell it today you would earn a total of  37,500  from holding Bowler Metcalf or generate 39.47% return on investment over 90 days.

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

Bowler Metcalf  vs.  Naspers Limited

Bowler Metcalf

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bowler Metcalf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bowler Metcalf may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Naspers Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Naspers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bowler Metcalf and Naspers

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

The idea behind Bowler Metcalf and Naspers Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.