Correlation Between NEW MILLENNIUM and Tencent Holdings

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

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

Diversification Opportunities for NEW MILLENNIUM and Tencent Holdings

-0.3

Correlation Coefficient

NEW MILLENNIUM  Tencent Holdings

Very good diversification

The 3 months correlation between NEW and Tencent is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and NEW MILLENNIUM 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 NEW MILLENNIUM IRON 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 NEW MILLENNIUM i.e., NEW MILLENNIUM and Tencent Holdings go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and Tencent Holdings

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to generate 0.68 times more return on investment than Tencent Holdings. However, NEW MILLENNIUM IRON is 1.47 times less risky than Tencent Holdings. It trades about 0.0 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  810.00  in NEW MILLENNIUM IRON on October 10, 2024 and sell it today you would lose (5.00) from holding NEW MILLENNIUM IRON or give up 0.62% of portfolio value over 90 days.

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

NEW MILLENNIUM IRON  vs.  Tencent Holdings Ltd

NEW MILLENNIUM IRON

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NEW MILLENNIUM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 NEW MILLENNIUM and Tencent Holdings

The main advantage of trading using opposite NEW MILLENNIUM and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEW MILLENNIUM 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 NEW MILLENNIUM IRON 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.