Correlation Between Tencent Holdings and Tencent Holdings

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

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

Diversification Opportunities for Tencent Holdings and Tencent Holdings

0.96

Correlation Coefficient

Tencent Holdings  Tencent Holdings

Almost no diversification

The 3 months correlation between Tencent and Tencent is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Tencent Holdings 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 Tencent Holdings Ltd 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 Tencent Holdings i.e., Tencent Holdings and Tencent Holdings go up and down completely randomly.

Pair Corralation between Tencent Holdings and Tencent Holdings

Assuming the 90 days trading horizon Tencent Holdings Ltd is expected to generate 1.32 times more return on investment than Tencent Holdings. However, Tencent Holdings is 1.32 times more volatile than Tencent Holdings. It trades about -0.09 of its potential returns per unit of risk. Tencent Holdings is currently generating about -0.18 per unit of risk. If you would invest  4,980  in Tencent Holdings Ltd on October 12, 2024 and sell it today you would lose (300.00) from holding Tencent Holdings Ltd or give up 6.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.44%
Values	Daily Returns

Tencent Holdings Ltd  vs.  Tencent Holdings

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.

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 Tencent Holdings and Tencent Holdings

The main advantage of trading using opposite Tencent Holdings and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings 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 Tencent Holdings Ltd 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.