Correlation Between Lendlease and Tencent Holdings

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

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

Diversification Opportunities for Lendlease and Tencent Holdings

0.03

Correlation Coefficient

Lendlease  Tencent Holdings

Significant diversification

The 3 months correlation between Lendlease and Tencent is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Lendlease 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 Lendlease Group 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 Lendlease i.e., Lendlease and Tencent Holdings go up and down completely randomly.

Pair Corralation between Lendlease and Tencent Holdings

Assuming the 90 days trading horizon Lendlease Group is expected to under-perform the Tencent Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Lendlease Group is 1.18 times less risky than Tencent Holdings. The stock trades about 0.0 of its potential returns per unit of risk. The Tencent Holdings Ltd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,587  in Tencent Holdings Ltd on October 3, 2024 and sell it today you would earn a total of  1,563  from holding Tencent Holdings Ltd or generate 43.57% return on investment over 90 days.

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

Lendlease Group  vs.  Tencent Holdings Ltd

Lendlease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 nearly stable basic indicators, Tencent Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lendlease and Tencent Holdings

The main advantage of trading using opposite Lendlease and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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 Lendlease Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.