Correlation Between Prosus NV and Indexco Limited

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

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

Diversification Opportunities for Prosus NV and Indexco Limited

0.58

Correlation Coefficient

Prosus NV  Indexco Limited

Very weak diversification

The 3 months correlation between Prosus and Indexco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited 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 Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Prosus NV i.e., Prosus NV and Indexco Limited go up and down completely randomly.

Pair Corralation between Prosus NV and Indexco Limited

Assuming the 90 days trading horizon Prosus NV is expected to under-perform the Indexco Limited. In addition to that, Prosus NV is 1.46 times more volatile than Indexco Limited . It trades about -0.22 of its total potential returns per unit of risk. Indexco Limited is currently generating about -0.28 per unit of volatility. If you would invest  438,100  in Indexco Limited on October 9, 2024 and sell it today you would lose (14,600) from holding Indexco Limited or give up 3.33% of portfolio value over 90 days.

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

Prosus NV  vs.  Indexco Limited

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 rather sound technical and fundamental indicators, Prosus NV is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Indexco Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indexco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Indexco Limited is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prosus NV and Indexco Limited

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

The idea behind Prosus NV and Indexco Limited 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.