Correlation Between Prosus NV and British Amer

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

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

Diversification Opportunities for Prosus NV and British Amer

-0.36

Correlation Coefficient

Prosus NV  British Amer

Very good diversification

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

Pair Corralation between Prosus NV and British Amer

Assuming the 90 days trading horizon Prosus NV is expected to generate 2.07 times less return on investment than British Amer. In addition to that, Prosus NV is 1.59 times more volatile than British American Tobacco. It trades about 0.01 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.04 per unit of volatility. If you would invest  5,536,268  in British American Tobacco on October 12, 2024 and sell it today you would earn a total of  1,419,932  from holding British American Tobacco or generate 25.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Prosus NV  vs.  British American Tobacco

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.

British American Tobacco

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, British Amer exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosus NV and British Amer

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

The idea behind Prosus NV and British American Tobacco 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..