Correlation Between Sabio Holdings and Naspers

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

By analyzing existing cross correlation between Sabio Holdings and Naspers Limited, you can compare the effects of market volatilities on Sabio Holdings and Naspers 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 Sabio Holdings with a short position of Naspers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabio Holdings and Naspers.

Diversification Opportunities for Sabio Holdings and Naspers

0.43

Correlation Coefficient

Sabio Holdings  Naspers

Very weak diversification

The 3 months correlation between Sabio and Naspers is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sabio Holdings and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited and Sabio Holdings 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 Sabio Holdings are associated (or correlated) with Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Sabio Holdings i.e., Sabio Holdings and Naspers go up and down completely randomly.

Pair Corralation between Sabio Holdings and Naspers

Assuming the 90 days horizon Sabio Holdings is expected to generate 1.04 times less return on investment than Naspers. In addition to that, Sabio Holdings is 2.18 times more volatile than Naspers Limited. It trades about 0.06 of its total potential returns per unit of risk. Naspers Limited is currently generating about 0.13 per unit of volatility. If you would invest  19,610  in Naspers Limited on September 12, 2024 and sell it today you would earn a total of  4,510  from holding Naspers Limited or generate 23.0% return on investment over 90 days.

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

Sabio Holdings  vs.  Naspers Limited

Sabio Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sabio Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Naspers Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Naspers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabio Holdings and Naspers

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

The idea behind Sabio Holdings and Naspers 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.