Correlation Between Prosus NV and MTN

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

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

Diversification Opportunities for Prosus NV and MTN

0.56

Correlation Coefficient

Prosus NV  MTN

Very weak diversification

The 3 months correlation between Prosus and MTN is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group 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 MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Prosus NV i.e., Prosus NV and MTN go up and down completely randomly.

Pair Corralation between Prosus NV and MTN

Assuming the 90 days trading horizon Prosus NV is expected to generate 2.01 times less return on investment than MTN. In addition to that, Prosus NV is 1.09 times more volatile than MTN Group. It trades about 0.1 of its total potential returns per unit of risk. MTN Group is currently generating about 0.23 per unit of volatility. If you would invest  928,700  in MTN Group on December 29, 2024 and sell it today you would earn a total of  320,700  from holding MTN Group or generate 34.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Prosus NV  vs.  MTN Group

Prosus NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Prosus NV exhibited solid returns over the last few months and may actually be approaching a breakup point.

MTN Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MTN Group 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, MTN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosus NV and MTN

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

The idea behind Prosus NV and MTN Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.