Correlation Between Naspers and Allied Electronics
Can any of the company-specific risk be diversified away by investing in both Naspers and Allied Electronics 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 Naspers and Allied Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naspers Limited and Allied Electronics, you can compare the effects of market volatilities on Naspers and Allied Electronics 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 Naspers with a short position of Allied Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naspers and Allied Electronics.
Diversification Opportunities for Naspers and Allied Electronics
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Naspers and Allied is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Naspers Limited and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and Naspers 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 Naspers Limited are associated (or correlated) with Allied Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Electronics has no effect on the direction of Naspers i.e., Naspers and Allied Electronics go up and down completely randomly.
Pair Corralation between Naspers and Allied Electronics
Assuming the 90 days trading horizon Naspers is expected to generate 2.15 times less return on investment than Allied Electronics. But when comparing it to its historical volatility, Naspers Limited is 1.12 times less risky than Allied Electronics. It trades about 0.04 of its potential returns per unit of risk. Allied Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 89,976 in Allied Electronics on September 23, 2024 and sell it today you would earn a total of 123,024 from holding Allied Electronics or generate 136.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Naspers Limited vs. Allied Electronics
Performance |
Timeline |
Naspers Limited |
Allied Electronics |
Naspers and Allied Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Naspers and Allied Electronics
The main advantage of trading using opposite Naspers and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naspers position performs unexpectedly, Allied Electronics 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 Allied Electronics will offset losses from the drop in Allied Electronics' long position.Naspers vs. Prosus NV | Naspers vs. ABSA Bank Limited | Naspers vs. Dipula Income | Naspers vs. Pepkor Holdings |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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