Correlation Between Weibo Corp and Prosus NV

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

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

Diversification Opportunities for Weibo Corp and Prosus NV

0.6

Correlation Coefficient

Weibo Corp  Prosus NV

Poor diversification

The 3 months correlation between Weibo and Prosus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Prosus NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV ADR and Weibo Corp 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 Weibo Corp are associated (or correlated) with Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV ADR has no effect on the direction of Weibo Corp i.e., Weibo Corp and Prosus NV go up and down completely randomly.

Pair Corralation between Weibo Corp and Prosus NV

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 2.64 times less return on investment than Prosus NV. In addition to that, Weibo Corp is 1.08 times more volatile than Prosus NV ADR. It trades about 0.04 of its total potential returns per unit of risk. Prosus NV ADR is currently generating about 0.12 per unit of volatility. If you would invest  794.00  in Prosus NV ADR on December 28, 2024 and sell it today you would earn a total of  144.00  from holding Prosus NV ADR or generate 18.14% return on investment over 90 days.

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

Weibo Corp  vs.  Prosus NV ADR

Weibo Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Prosus NV ADR

Risk-Adjusted Performance

OK

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

Pair Trading with Weibo Corp and Prosus NV

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

The idea behind Weibo Corp and Prosus NV ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.