Correlation Between Prosus and Trivago NV

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

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

Diversification Opportunities for Prosus and Trivago NV

-0.22

Correlation Coefficient

Prosus  Trivago NV

Very good diversification

The 3 months correlation between Prosus and Trivago is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Prosus and Trivago NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trivago NV and Prosus 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 Prosus are associated (or correlated) with Trivago NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trivago NV has no effect on the direction of Prosus i.e., Prosus and Trivago NV go up and down completely randomly.

Pair Corralation between Prosus and Trivago NV

Assuming the 90 days horizon Prosus is expected to generate 97.5 times less return on investment than Trivago NV. But when comparing it to its historical volatility, Prosus is 4.88 times less risky than Trivago NV. It trades about 0.02 of its potential returns per unit of risk. Trivago NV is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Trivago NV on September 12, 2024 and sell it today you would earn a total of  76.00  from holding Trivago NV or generate 46.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Prosus  vs.  Trivago NV

Prosus

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Trivago NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trivago NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Trivago NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosus and Trivago NV

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

The idea behind Prosus and Trivago NV 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.