Correlation Between Nampak and Naspers

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

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

Diversification Opportunities for Nampak and Naspers

0.03

Correlation Coefficient

Nampak  Naspers

Significant diversification

The 3 months correlation between Nampak and Naspers is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nampak and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited and Nampak 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 Nampak 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 Nampak i.e., Nampak and Naspers go up and down completely randomly.

Pair Corralation between Nampak and Naspers

Assuming the 90 days trading horizon Nampak is expected to generate 1.38 times more return on investment than Naspers. However, Nampak is 1.38 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 -0.12 per unit of risk. If you would invest  4,250,000  in Nampak on October 13, 2024 and sell it today you would lose (390,000) from holding Nampak or give up 9.18% of portfolio value over 90 days.

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

Nampak  vs.  Naspers Limited

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak 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.

Naspers Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naspers Limited 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.

Pair Trading with Nampak and Naspers

The main advantage of trading using opposite Nampak and Naspers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nampak 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 Nampak 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.