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 ADR, 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 ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROSUS NV ADR 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 ADR 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 is expected to generate 2.22 times less return on investment than PROSUS NV. But when comparing it to its historical volatility, Tencent Holdings Ltd is 2.58 times less risky than PROSUS NV. It trades about 0.04 of its potential returns per unit of risk. PROSUS NV ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 561.00 in PROSUS NV ADR on August 27, 2024 and sell it today you would earn a total of 184.00 from holding PROSUS NV ADR or generate 32.8% return on investment 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 ADR
Performance |
| Timeline |
| Tencent Holdings |
| PROSUS NV ADR |
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. Apyx Medical Corp | Tencent Holdings vs. Clearside Biomedical | Tencent Holdings vs. SAFETY MEDICAL PROD | Tencent Holdings vs. AVITA Medical |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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