Correlation Between Geely Automobile and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Geely Automobile 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 Geely Automobile and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geely Automobile Holdings and Tencent Holdings, you can compare the effects of market volatilities on Geely Automobile 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 Geely Automobile with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Tencent Holdings.
Diversification Opportunities for Geely Automobile and Tencent Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Geely and Tencent is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Geely Automobile 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 Geely Automobile Holdings 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 Geely Automobile i.e., Geely Automobile and Tencent Holdings go up and down completely randomly.
Pair Corralation between Geely Automobile and Tencent Holdings
Assuming the 90 days horizon Geely Automobile Holdings is expected to under-perform the Tencent Holdings. In addition to that, Geely Automobile is 1.37 times more volatile than Tencent Holdings. It trades about -0.19 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 4,977 in Tencent Holdings on August 27, 2024 and sell it today you would lose (76.00) from holding Tencent Holdings or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geely Automobile Holdings vs. Tencent Holdings
Performance |
| Timeline |
| Geely Automobile Holdings |
| Tencent Holdings |
Geely Automobile and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geely Automobile and Tencent Holdings
The main advantage of trading using opposite Geely Automobile and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile 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.| Geely Automobile vs. Tesla Inc | Geely Automobile vs. Superior Plus Corp | Geely Automobile vs. NMI Holdings | Geely Automobile vs. Origin Agritech |
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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