Correlation Between Naspers and Compagnie Financire

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

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

Diversification Opportunities for Naspers and Compagnie Financire

0.1

Correlation Coefficient

Naspers  Compagnie Financire

Average diversification

The 3 months correlation between Naspers and Compagnie is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Naspers Limited and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire 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 Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of Naspers i.e., Naspers and Compagnie Financire go up and down completely randomly.

Pair Corralation between Naspers and Compagnie Financire

Assuming the 90 days trading horizon Naspers Limited is expected to under-perform the Compagnie Financire. In addition to that, Naspers is 1.18 times more volatile than Compagnie Financire Richemont. It trades about -0.12 of its total potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.1 per unit of volatility. If you would invest  26,475,000  in Compagnie Financire Richemont on October 12, 2024 and sell it today you would earn a total of  2,514,700  from holding Compagnie Financire Richemont or generate 9.5% return on investment over 90 days.

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

Naspers Limited  vs.  Compagnie Financire Richemont

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.

Compagnie Financire

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Compagnie Financire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Naspers and Compagnie Financire

The main advantage of trading using opposite Naspers and Compagnie Financire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naspers position performs unexpectedly, Compagnie Financire 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 Compagnie Financire will offset losses from the drop in Compagnie Financire's long position.

The idea behind Naspers Limited and Compagnie Financire Richemont 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.