Correlation Between Tencent Holdings and Prosus NV
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Prosus NV 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 Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings Ltd and Prosus NV, you can compare the effects of market volatilities on Tencent Holdings and Prosus NV 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 Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Prosus NV.
Diversification Opportunities for Tencent Holdings and Prosus NV
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tencent and Prosus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Ltd are associated (or correlated) with Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Prosus NV go up and down completely randomly.
Pair Corralation between Tencent Holdings and Prosus NV
Assuming the 90 days trading horizon Tencent Holdings Ltd is expected to generate 1.67 times more return on investment than Prosus NV. However, Tencent Holdings is 1.67 times more volatile than Prosus NV. It trades about -0.04 of its potential returns per unit of risk. Prosus NV is currently generating about -0.18 per unit of risk. If you would invest 4,940 in Tencent Holdings Ltd on August 30, 2024 and sell it today you would lose (100.00) from holding Tencent Holdings Ltd or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Holdings Ltd vs. Prosus NV
Performance |
| Timeline |
| Tencent Holdings |
| Prosus NV |
Tencent Holdings and Prosus NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and Prosus NV
The main advantage of trading using opposite Tencent Holdings and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Prosus NV 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 Prosus NV will offset losses from the drop in Prosus NV's long position.| Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet | Tencent Holdings vs. Meta Platforms |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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