Correlation Between Prosus NV and Pershing Square

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

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

Diversification Opportunities for Prosus NV and Pershing Square

-0.09

Correlation Coefficient

Prosus NV  Pershing Square

Good diversification

The 3 months correlation between Prosus and Pershing is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Prosus NV i.e., Prosus NV and Pershing Square go up and down completely randomly.

Pair Corralation between Prosus NV and Pershing Square

Assuming the 90 days trading horizon Prosus NV is expected to generate 1.5 times more return on investment than Pershing Square. However, Prosus NV is 1.5 times more volatile than Pershing Square Holdings. It trades about 0.16 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.0 per unit of risk. If you would invest  3,398  in Prosus NV on September 19, 2024 and sell it today you would earn a total of  637.00  from holding Prosus NV or generate 18.75% return on investment over 90 days.

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

Prosus NV  vs.  Pershing Square Holdings

Prosus NV

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Prosus NV unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pershing Square Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pershing Square Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Pershing Square is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prosus NV and Pershing Square

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

The idea behind Prosus NV and Pershing Square Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..