Correlation Between G III and Prosus NV

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

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

Diversification Opportunities for G III and Prosus NV

-0.05

Correlation Coefficient

G III  Prosus NV

Good diversification

The 3 months correlation between GI4 and Prosus is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and G III 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 G III Apparel Group 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 G III i.e., G III and Prosus NV go up and down completely randomly.

Pair Corralation between G III and Prosus NV

Assuming the 90 days horizon G III Apparel Group is expected to generate 1.57 times more return on investment than Prosus NV. However, G III is 1.57 times more volatile than Prosus NV. It trades about 0.06 of its potential returns per unit of risk. Prosus NV is currently generating about 0.06 per unit of risk. If you would invest  1,900  in G III Apparel Group on September 12, 2024 and sell it today you would earn a total of  1,060  from holding G III Apparel Group or generate 55.79% return on investment over 90 days.

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

G III Apparel Group  vs.  Prosus NV

G III Apparel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, G III may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prosus NV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosus NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G III and Prosus NV

The main advantage of trading using opposite G III and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G III 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 G III Apparel Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.