Correlation Between SalMar ASA and Tencent Holdings

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

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

Diversification Opportunities for SalMar ASA and Tencent Holdings

0.0

Correlation Coefficient

SalMar ASA  Tencent Holdings

Pay attention - limited upside

The 3 months correlation between SalMar and Tencent is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and SalMar ASA 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 SalMar ASA 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 SalMar ASA i.e., SalMar ASA and Tencent Holdings go up and down completely randomly.

Pair Corralation between SalMar ASA and Tencent Holdings

Assuming the 90 days horizon SalMar ASA is expected to generate 0.86 times more return on investment than Tencent Holdings. However, SalMar ASA is 1.17 times less risky than Tencent Holdings. It trades about 0.03 of its potential returns per unit of risk. Tencent Holdings is currently generating about 0.03 per unit of risk. If you would invest  3,799  in SalMar ASA on October 12, 2024 and sell it today you would earn a total of  781.00  from holding SalMar ASA or generate 20.56% return on investment over 90 days.

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

SalMar ASA  vs.  Tencent Holdings

SalMar ASA

Risk-Adjusted Performance

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Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SalMar ASA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tencent Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tencent Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 SalMar ASA and Tencent Holdings

The main advantage of trading using opposite SalMar ASA and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SalMar ASA 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 SalMar ASA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.