Correlation Between Pershing Square and Prosus NV

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

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

Diversification Opportunities for Pershing Square and Prosus NV

-0.06

Correlation Coefficient

Pershing Square  Prosus NV

Good diversification

The 3 months correlation between Pershing and Prosus is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV and Pershing Square 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 Pershing Square Holdings 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 has no effect on the direction of Pershing Square i.e., Pershing Square and Prosus NV go up and down completely randomly.

Pair Corralation between Pershing Square and Prosus NV

Assuming the 90 days trading horizon Pershing Square Holdings is expected to generate 0.63 times more return on investment than Prosus NV. However, Pershing Square Holdings is 1.58 times less risky than Prosus NV. It trades about 0.07 of its potential returns per unit of risk. Prosus NV is currently generating about 0.04 per unit of risk. If you would invest  3,370  in Pershing Square Holdings on September 20, 2024 and sell it today you would earn a total of  1,545  from holding Pershing Square Holdings or generate 45.85% return on investment over 90 days.

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

Pershing Square Holdings  vs.  Prosus NV

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.

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.

Pair Trading with Pershing Square and Prosus NV

The main advantage of trading using opposite Pershing Square and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pershing Square 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 Pershing Square Holdings and Prosus NV 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.

Check out your portfolio center.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.