Correlation Between Ford and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Tencent Holdings Ltd, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Tencent Holdings.
Diversification Opportunities for Ford and Tencent Holdings
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Tencent is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Ford 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 Ford Motor 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 Ford i.e., Ford and Tencent Holdings go up and down completely randomly.
Pair Corralation between Ford and Tencent Holdings
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.4 times more return on investment than Tencent Holdings. However, Ford is 1.4 times more volatile than Tencent Holdings Ltd. It trades about 0.0 of its potential returns per unit of risk. Tencent Holdings Ltd is currently generating about -0.08 per unit of risk. If you would invest 1,122 in Ford Motor on August 28, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Tencent Holdings Ltd
Performance |
| Timeline |
| Ford Motor |
| Tencent Holdings |
Ford and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Tencent Holdings
The main advantage of trading using opposite Ford and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Tencent Holdings vs. TROPHY GAMES DEV | Tencent Holdings vs. Penn National Gaming | Tencent Holdings vs. Air Transport Services | Tencent Holdings vs. Fukuyama Transporting Co |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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