Correlation Between Tencent Holdings and SERI INDUSTRIAL

Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and SERI INDUSTRIAL 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 SERI INDUSTRIAL 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 SERI INDUSTRIAL EO, you can compare the effects of market volatilities on Tencent Holdings and SERI INDUSTRIAL 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 SERI INDUSTRIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and SERI INDUSTRIAL.

Diversification Opportunities for Tencent Holdings and SERI INDUSTRIAL

-0.07

Correlation Coefficient

Tencent Holdings  SERI INDUSTRIAL

Good diversification

The 3 months correlation between Tencent and SERI is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO 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 SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and SERI INDUSTRIAL go up and down completely randomly.

Pair Corralation between Tencent Holdings and SERI INDUSTRIAL

Assuming the 90 days trading horizon Tencent Holdings Ltd is expected to generate 0.64 times more return on investment than SERI INDUSTRIAL. However, Tencent Holdings Ltd is 1.55 times less risky than SERI INDUSTRIAL. It trades about 0.07 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about -0.01 per unit of risk. If you would invest  3,607  in Tencent Holdings Ltd on October 5, 2024 and sell it today you would earn a total of  1,493  from holding Tencent Holdings Ltd or generate 41.39% return on investment over 90 days.

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

Tencent Holdings Ltd  vs.  SERI INDUSTRIAL EO

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.

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical 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 SERI INDUSTRIAL

The main advantage of trading using opposite Tencent Holdings and SERI INDUSTRIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, SERI INDUSTRIAL 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 SERI INDUSTRIAL will offset losses from the drop in SERI INDUSTRIAL's long position.

The idea behind Tencent Holdings Ltd and SERI INDUSTRIAL EO 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.