Correlation Between Kap Industrial and Prosus NV

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

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

Diversification Opportunities for Kap Industrial and Prosus NV

0.18

Correlation Coefficient

Kap Industrial  Prosus NV

Average diversification

The 3 months correlation between Kap and Prosus is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and Kap Industrial 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 Kap Industrial Holdings 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 Kap Industrial i.e., Kap Industrial and Prosus NV go up and down completely randomly.

Pair Corralation between Kap Industrial and Prosus NV

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Prosus NV. In addition to that, Kap Industrial is 1.3 times more volatile than Prosus NV. It trades about -0.02 of its total potential returns per unit of risk. Prosus NV is currently generating about 0.03 per unit of volatility. If you would invest  6,296,039  in Prosus NV on October 5, 2024 and sell it today you would earn a total of  1,070,661  from holding Prosus NV or generate 17.01% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  Prosus NV

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Prosus NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosus NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kap Industrial and Prosus NV

The main advantage of trading using opposite Kap Industrial and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial 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 Kap Industrial Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.