Correlation Between ThedirectoryCom and Tencent Holdings

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

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

Diversification Opportunities for ThedirectoryCom and Tencent Holdings

0.46

Correlation Coefficient

ThedirectoryCom  Tencent Holdings

Very weak diversification

The 3 months correlation between ThedirectoryCom and Tencent is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ThedirectoryCom and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and ThedirectoryCom 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 ThedirectoryCom 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 ThedirectoryCom i.e., ThedirectoryCom and Tencent Holdings go up and down completely randomly.

Pair Corralation between ThedirectoryCom and Tencent Holdings

Given the investment horizon of 90 days ThedirectoryCom is expected to under-perform the Tencent Holdings. In addition to that, ThedirectoryCom is 5.18 times more volatile than Tencent Holdings. It trades about -0.13 of its total potential returns per unit of risk. Tencent Holdings is currently generating about -0.02 per unit of volatility. If you would invest  5,674  in Tencent Holdings on October 9, 2024 and sell it today you would lose (286.00) from holding Tencent Holdings or give up 5.04% of portfolio value over 90 days.

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

ThedirectoryCom  vs.  Tencent Holdings

ThedirectoryCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThedirectoryCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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

Pair Trading with ThedirectoryCom and Tencent Holdings

The main advantage of trading using opposite ThedirectoryCom and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ThedirectoryCom 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 ThedirectoryCom and Tencent Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.