Correlation Between Prosus NV and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Prosus NV 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 Prosus NV and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus NV ADR and Tencent Holdings, you can compare the effects of market volatilities on Prosus NV 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 Prosus NV with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus NV and Tencent Holdings.
Diversification Opportunities for Prosus NV and Tencent Holdings
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prosus and Tencent is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV ADR and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Prosus NV 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 Prosus NV ADR 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 Prosus NV i.e., Prosus NV and Tencent Holdings go up and down completely randomly.
Pair Corralation between Prosus NV and Tencent Holdings
Assuming the 90 days horizon Prosus NV ADR is expected to generate 0.75 times more return on investment than Tencent Holdings. However, Prosus NV ADR is 1.34 times less risky than Tencent Holdings. It trades about 0.09 of its potential returns per unit of risk. Tencent Holdings is currently generating about 0.05 per unit of risk. If you would invest 730.00 in Prosus NV ADR on September 3, 2024 and sell it today you would earn a total of 86.00 from holding Prosus NV ADR or generate 11.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Prosus NV ADR vs. Tencent Holdings
Performance |
Timeline |
Prosus NV ADR |
Tencent Holdings |
Prosus NV and Tencent Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prosus NV and Tencent Holdings
The main advantage of trading using opposite Prosus NV and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV 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.Prosus NV vs. Ping An Insurance | Prosus NV vs. Prosus | Prosus NV vs. Meituan ADR | Prosus NV vs. Murata Manufacturing |
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Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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