Correlation Between AIRBNB INC and Tencent Holdings

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

By analyzing existing cross correlation between AIRBNB INC DL 01 and Tencent Holdings, you can compare the effects of market volatilities on AIRBNB INC 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 AIRBNB INC with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIRBNB INC and Tencent Holdings.

Diversification Opportunities for AIRBNB INC and Tencent Holdings

0.61

Correlation Coefficient

AIRBNB INC  Tencent Holdings

Poor diversification

The 3 months correlation between AIRBNB and Tencent is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AIRBNB INC DL 01 and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and AIRBNB INC 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 AIRBNB INC DL 01 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 AIRBNB INC i.e., AIRBNB INC and Tencent Holdings go up and down completely randomly.

Pair Corralation between AIRBNB INC and Tencent Holdings

Assuming the 90 days horizon AIRBNB INC is expected to generate 8.42 times less return on investment than Tencent Holdings. In addition to that, AIRBNB INC is 1.11 times more volatile than Tencent Holdings. It trades about 0.01 of its total potential returns per unit of risk. Tencent Holdings is currently generating about 0.05 per unit of volatility. If you would invest  4,379  in Tencent Holdings on September 1, 2024 and sell it today you would earn a total of  484.00  from holding Tencent Holdings or generate 11.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.24%
Values	Daily Returns

AIRBNB INC DL 01  vs.  Tencent Holdings

AIRBNB INC DL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIRBNB INC DL 01 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIRBNB INC reported solid returns over the last few months and may actually be approaching a breakup point.

Tencent Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tencent Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIRBNB INC and Tencent Holdings

The main advantage of trading using opposite AIRBNB INC and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIRBNB INC 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 AIRBNB INC DL 01 and Tencent 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.