Correlation Between Tencent Holdings and Kuehne +

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

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

Diversification Opportunities for Tencent Holdings and Kuehne +

0.27

Correlation Coefficient

Tencent Holdings  Kuehne +

Modest diversification

The 3 months correlation between Tencent and Kuehne is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Kuehne Nagel International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuehne Nagel Interna 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 Kuehne +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuehne Nagel Interna has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Kuehne + go up and down completely randomly.

Pair Corralation between Tencent Holdings and Kuehne +

Assuming the 90 days trading horizon Tencent Holdings is expected to generate 1.3 times more return on investment than Kuehne +. However, Tencent Holdings is 1.3 times more volatile than Kuehne Nagel International. It trades about 0.15 of its potential returns per unit of risk. Kuehne Nagel International is currently generating about 0.03 per unit of risk. If you would invest  4,855  in Tencent Holdings on November 28, 2024 and sell it today you would earn a total of  1,115  from holding Tencent Holdings or generate 22.97% return on investment over 90 days.

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

Tencent Holdings  vs.  Kuehne Nagel International

Tencent Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tencent Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Kuehne Nagel Interna

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuehne Nagel International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Kuehne + is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tencent Holdings and Kuehne +

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

The idea behind Tencent Holdings and Kuehne Nagel International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.