Correlation Between Tencent Holdings and Moneysupermarket

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

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

Diversification Opportunities for Tencent Holdings and Moneysupermarket

0.47

Correlation Coefficient

Tencent Holdings  Moneysupermarket

Very weak diversification

The 3 months correlation between Tencent and Moneysupermarket is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Moneysupermarket Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moneysupermarket 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 are associated (or correlated) with Moneysupermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moneysupermarket has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Moneysupermarket go up and down completely randomly.

Pair Corralation between Tencent Holdings and Moneysupermarket

Assuming the 90 days trading horizon Tencent Holdings is expected to under-perform the Moneysupermarket. In addition to that, Tencent Holdings is 1.32 times more volatile than Moneysupermarket Group PLC. It trades about -0.25 of its total potential returns per unit of risk. Moneysupermarket Group PLC is currently generating about -0.05 per unit of volatility. If you would invest  217.00  in Moneysupermarket Group PLC on October 21, 2024 and sell it today you would lose (4.00) from holding Moneysupermarket Group PLC or give up 1.84% of portfolio value over 90 days.

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

Tencent Holdings  vs.  Moneysupermarket Group PLC

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

Moneysupermarket

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tencent Holdings and Moneysupermarket

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

The idea behind Tencent Holdings and Moneysupermarket Group PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.