Correlation Between Virtu Financial and Tencent Holdings

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

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

Diversification Opportunities for Virtu Financial and Tencent Holdings

-0.33

Correlation Coefficient

Virtu Financial  Tencent Holdings

Very good diversification

The 3 months correlation between Virtu and Tencent is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Virtu Financial and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Virtu Financial 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 Virtu Financial are associated (or correlated) with Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of Virtu Financial i.e., Virtu Financial and Tencent Holdings go up and down completely randomly.

Pair Corralation between Virtu Financial and Tencent Holdings

Assuming the 90 days horizon Virtu Financial is expected to generate 0.46 times more return on investment than Tencent Holdings. However, Virtu Financial is 2.18 times less risky than Tencent Holdings. It trades about 0.14 of its potential returns per unit of risk. Tencent Holdings Ltd is currently generating about -0.23 per unit of risk. If you would invest  3,360  in Virtu Financial on October 10, 2024 and sell it today you would earn a total of  120.00  from holding Virtu Financial or generate 3.57% return on investment over 90 days.

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

Virtu Financial  vs.  Tencent Holdings Ltd

Virtu Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtu Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Tencent Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tencent Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Virtu Financial and Tencent Holdings

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

The idea behind Virtu Financial and Tencent Holdings Ltd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.