Correlation Between Tencent Holdings and Kuaishou Technology

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Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Kuaishou Technology 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 Kuaishou Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Kuaishou Technology, you can compare the effects of market volatilities on Tencent Holdings and Kuaishou Technology 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 Kuaishou Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Kuaishou Technology.

Diversification Opportunities for Tencent Holdings and Kuaishou Technology

TencentKuaishouDiversified AwayTencentKuaishouDiversified Away100%
0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Tencent and Kuaishou is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Kuaishou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuaishou 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 Kuaishou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuaishou Technology has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Kuaishou Technology go up and down completely randomly.

Pair Corralation between Tencent Holdings and Kuaishou Technology

Assuming the 90 days horizon Tencent Holdings is expected to generate 0.63 times more return on investment than Kuaishou Technology. However, Tencent Holdings is 1.6 times less risky than Kuaishou Technology. It trades about 0.14 of its potential returns per unit of risk. Kuaishou Technology is currently generating about 0.08 per unit of risk. If you would invest  4,972  in Tencent Holdings on November 28, 2024 and sell it today you would earn a total of  1,209  from holding Tencent Holdings or generate 24.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy92.06%
ValuesDaily Returns

Tencent Holdings  vs.  Kuaishou Technology

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505101520
JavaScript chart by amCharts 3.21.15TCTZF KUASF
       Timeline  
Tencent Holdings 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 10 (%) 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb4550556065
Kuaishou Technology 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Kuaishou Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kuaishou Technology reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15JanFebFeb55.566.577.5

Tencent Holdings and Kuaishou Technology Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.01-6.75-4.49-2.220.02.34.687.079.4511.83 0.0150.0200.0250.0300.0350.0400.045
JavaScript chart by amCharts 3.21.15TCTZF KUASF
       Returns  

Pair Trading with Tencent Holdings and Kuaishou Technology

The main advantage of trading using opposite Tencent Holdings and Kuaishou Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Kuaishou Technology 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 Kuaishou Technology will offset losses from the drop in Kuaishou Technology's long position.
The idea behind Tencent Holdings and Kuaishou 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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