Correlation Between Prosus NV and Outbrain

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

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

Diversification Opportunities for Prosus NV and Outbrain

-0.26

Correlation Coefficient

Prosus NV  Outbrain

Very good diversification

The 3 months correlation between Prosus and Outbrain is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV ADR and Outbrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outbrain 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 ADR are associated (or correlated) with Outbrain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outbrain has no effect on the direction of Prosus NV i.e., Prosus NV and Outbrain go up and down completely randomly.

Pair Corralation between Prosus NV and Outbrain

Assuming the 90 days horizon Prosus NV ADR is expected to generate 0.9 times more return on investment than Outbrain. However, Prosus NV ADR is 1.11 times less risky than Outbrain. It trades about 0.1 of its potential returns per unit of risk. Outbrain is currently generating about 0.07 per unit of risk. If you would invest  735.00  in Prosus NV ADR on September 4, 2024 and sell it today you would earn a total of  92.00  from holding Prosus NV ADR or generate 12.52% return on investment over 90 days.

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

Prosus NV ADR  vs.  Outbrain

Prosus NV ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV ADR are ranked lower than 7 (%) 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.

Outbrain

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Outbrain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Outbrain may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prosus NV and Outbrain

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

The idea behind Prosus NV ADR and Outbrain 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 Anywhere module to track or share privately all of your investments from the convenience of any device.