Correlation Between Meta Platforms and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Tencent Holdings Ltd, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Tencent Holdings.
Diversification Opportunities for Meta Platforms and Tencent Holdings
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Meta and Tencent is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and Tencent Holdings go up and down completely randomly.
Pair Corralation between Meta Platforms and Tencent Holdings
Assuming the 90 days trading horizon Meta Platforms is expected to generate 1.67 times more return on investment than Tencent Holdings. However, Meta Platforms is 1.67 times more volatile than Tencent Holdings Ltd. It trades about -0.16 of its potential returns per unit of risk. Tencent Holdings Ltd is currently generating about -0.33 per unit of risk. If you would invest 53,710 in Meta Platforms on January 18, 2025 and sell it today you would lose (9,545) from holding Meta Platforms or give up 17.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms vs. Tencent Holdings Ltd
Performance |
| Timeline |
| Meta Platforms |
| Tencent Holdings |
Meta Platforms and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Tencent Holdings
The main advantage of trading using opposite Meta Platforms and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.| Meta Platforms vs. Amazon Inc | Meta Platforms vs. Apple Inc | Meta Platforms vs. Meta Platforms | Meta Platforms vs. Microsoft |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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