Correlation Between Naspers and Exxaro Resources

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

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

Diversification Opportunities for Naspers and Exxaro Resources

0.36

Correlation Coefficient

Naspers  Exxaro Resources

Weak diversification

The 3 months correlation between Naspers and Exxaro is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Naspers Limited and Exxaro Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Resources 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 Exxaro Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Resources has no effect on the direction of Naspers i.e., Naspers and Exxaro Resources go up and down completely randomly.

Pair Corralation between Naspers and Exxaro Resources

Assuming the 90 days trading horizon Naspers Limited is expected to generate 1.21 times more return on investment than Exxaro Resources. However, Naspers is 1.21 times more volatile than Exxaro Resources. It trades about 0.02 of its potential returns per unit of risk. Exxaro Resources is currently generating about 0.0 per unit of risk. If you would invest  33,840,900  in Naspers Limited on October 12, 2024 and sell it today you would earn a total of  2,688,300  from holding Naspers Limited or generate 7.94% return on investment over 90 days.

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

Naspers Limited  vs.  Exxaro Resources

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.

Exxaro Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxaro Resources 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 Naspers and Exxaro Resources

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

The idea behind Naspers Limited and Exxaro Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.