Correlation Between Naspers and Transpaco

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

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

Diversification Opportunities for Naspers and Transpaco

0.19

Correlation Coefficient

Naspers  Transpaco

Average diversification

The 3 months correlation between Naspers and Transpaco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Naspers Limited and Transpaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpaco 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 Transpaco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transpaco has no effect on the direction of Naspers i.e., Naspers and Transpaco go up and down completely randomly.

Pair Corralation between Naspers and Transpaco

Assuming the 90 days trading horizon Naspers is expected to generate 1.73 times less return on investment than Transpaco. But when comparing it to its historical volatility, Naspers Limited is 1.83 times less risky than Transpaco. It trades about 0.04 of its potential returns per unit of risk. Transpaco is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  243,362  in Transpaco on September 24, 2024 and sell it today you would earn a total of  126,638  from holding Transpaco or generate 52.04% 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.  Transpaco

Naspers Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Naspers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transpaco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transpaco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Transpaco is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Naspers and Transpaco

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

The idea behind Naspers Limited and Transpaco 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.