Correlation Between Tencent Holdings and Golden Grail

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

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

Diversification Opportunities for Tencent Holdings and Golden Grail

-0.68

Correlation Coefficient

Tencent Holdings  Golden Grail

Excellent diversification

The 3 months correlation between Tencent and Golden is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Golden Grail Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Grail Technology 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 Golden Grail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Grail Technology has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Golden Grail go up and down completely randomly.

Pair Corralation between Tencent Holdings and Golden Grail

Assuming the 90 days horizon Tencent Holdings is expected to generate 0.33 times more return on investment than Golden Grail. However, Tencent Holdings is 3.05 times less risky than Golden Grail. It trades about 0.11 of its potential returns per unit of risk. Golden Grail Technology is currently generating about -0.06 per unit of risk. If you would invest  5,385  in Tencent Holdings on December 28, 2024 and sell it today you would earn a total of  1,053  from holding Tencent Holdings or generate 19.55% return on investment over 90 days.

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

Tencent Holdings  vs.  Golden Grail Technology

Tencent Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Tencent Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Golden Grail Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Grail Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tencent Holdings and Golden Grail

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

The idea behind Tencent Holdings and Golden Grail Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.