Correlation Between Prosus NV and African Media
Can any of the company-specific risk be diversified away by investing in both Prosus NV and African Media 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 NV and African Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus NV and African Media Entertainment, you can compare the effects of market volatilities on Prosus NV and African Media 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 NV with a short position of African Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus NV and African Media.
Diversification Opportunities for Prosus NV and African Media
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prosus and African is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and African Media Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Media Entert and Prosus NV 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 NV are associated (or correlated) with African Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Media Entert has no effect on the direction of Prosus NV i.e., Prosus NV and African Media go up and down completely randomly.
Pair Corralation between Prosus NV and African Media
Assuming the 90 days trading horizon Prosus NV is expected to generate 2.77 times less return on investment than African Media. But when comparing it to its historical volatility, Prosus NV is 2.74 times less risky than African Media. It trades about 0.07 of its potential returns per unit of risk. African Media Entertainment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 295,420 in African Media Entertainment on September 24, 2024 and sell it today you would earn a total of 134,480 from holding African Media Entertainment or generate 45.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Prosus NV vs. African Media Entertainment
Performance |
Timeline |
Prosus NV |
African Media Entert |
Prosus NV and African Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prosus NV and African Media
The main advantage of trading using opposite Prosus NV and African Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV position performs unexpectedly, African Media 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 African Media will offset losses from the drop in African Media's long position.Prosus NV vs. ABSA Bank Limited | Prosus NV vs. Dipula Income | Prosus NV vs. Pepkor Holdings | Prosus NV vs. Alexander Forbes Grp |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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