Correlation Between TrueCar and Prosus

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

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

Diversification Opportunities for TrueCar and Prosus

-0.82

Correlation Coefficient

TrueCar  Prosus

Pay attention - limited upside

The 3 months correlation between TrueCar and Prosus is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus and TrueCar 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 TrueCar are associated (or correlated) with Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of TrueCar i.e., TrueCar and Prosus go up and down completely randomly.

Pair Corralation between TrueCar and Prosus

Given the investment horizon of 90 days TrueCar is expected to under-perform the Prosus. In addition to that, TrueCar is 1.21 times more volatile than Prosus. It trades about -0.33 of its total potential returns per unit of risk. Prosus is currently generating about 0.12 per unit of volatility. If you would invest  4,000  in Prosus on December 29, 2024 and sell it today you would earn a total of  895.00  from holding Prosus or generate 22.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

TrueCar  vs.  Prosus

TrueCar

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrueCar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Prosus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosus reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TrueCar and Prosus

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

The idea behind TrueCar and Prosus 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.