Correlation Between SERI INDUSTRIAL and Tencent Holdings

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

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

Diversification Opportunities for SERI INDUSTRIAL and Tencent Holdings

0.08

Correlation Coefficient

SERI INDUSTRIAL  Tencent Holdings

Significant diversification

The 3 months correlation between SERI and Tencent is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SERI INDUSTRIAL EO and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and SERI INDUSTRIAL 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 SERI INDUSTRIAL EO 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 SERI INDUSTRIAL i.e., SERI INDUSTRIAL and Tencent Holdings go up and down completely randomly.

Pair Corralation between SERI INDUSTRIAL and Tencent Holdings

If you would invest  3,369  in Tencent Holdings Ltd on October 20, 2024 and sell it today you would earn a total of  1,411  from holding Tencent Holdings Ltd or generate 41.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

SERI INDUSTRIAL EO  vs.  Tencent Holdings Ltd

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 weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SERI INDUSTRIAL and Tencent Holdings

The main advantage of trading using opposite SERI INDUSTRIAL and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SERI INDUSTRIAL 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 SERI INDUSTRIAL EO 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.