Correlation Between HomeChoice Investments and Naspers

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

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

Diversification Opportunities for HomeChoice Investments and Naspers

-0.35

Correlation Coefficient

HomeChoice Investments  Naspers

Very good diversification

The 3 months correlation between HomeChoice and Naspers is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited and HomeChoice Investments 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 HomeChoice Investments 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 HomeChoice Investments i.e., HomeChoice Investments and Naspers go up and down completely randomly.

Pair Corralation between HomeChoice Investments and Naspers

Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 4.29 times less return on investment than Naspers. In addition to that, HomeChoice Investments is 1.11 times more volatile than Naspers Limited. It trades about 0.01 of its total potential returns per unit of risk. Naspers Limited is currently generating about 0.07 per unit of volatility. If you would invest  42,471,000  in Naspers Limited on December 25, 2024 and sell it today you would earn a total of  3,903,800  from holding Naspers Limited or generate 9.19% return on investment over 90 days.

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

HomeChoice Investments  vs.  Naspers Limited

HomeChoice Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeChoice Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, HomeChoice Investments is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Naspers Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 5 (%) 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 April 2025.

Pair Trading with HomeChoice Investments and Naspers

The main advantage of trading using opposite HomeChoice Investments and Naspers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeChoice Investments 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 HomeChoice Investments 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.