Correlation Between Prosus NV and Argent

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

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

Diversification Opportunities for Prosus NV and Argent

0.2

Correlation Coefficient

Prosus NV  Argent

Modest diversification

The 3 months correlation between Prosus and Argent is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and Argent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argent 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 Argent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argent has no effect on the direction of Prosus NV i.e., Prosus NV and Argent go up and down completely randomly.

Pair Corralation between Prosus NV and Argent

Assuming the 90 days trading horizon Prosus NV is expected to under-perform the Argent. In addition to that, Prosus NV is 1.14 times more volatile than Argent. It trades about -0.12 of its total potential returns per unit of risk. Argent is currently generating about -0.01 per unit of volatility. If you would invest  270,000  in Argent on October 12, 2024 and sell it today you would lose (5,000) from holding Argent or give up 1.85% of portfolio value over 90 days.

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

Prosus NV  vs.  Argent

Prosus NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosus NV 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.

Argent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Argent is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prosus NV and Argent

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

The idea behind Prosus NV and Argent 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.