Correlation Between Tencent Holdings and CarsalesCom
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and CarsalesCom 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 CarsalesCom 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 CarsalesCom, you can compare the effects of market volatilities on Tencent Holdings and CarsalesCom 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 CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and CarsalesCom.
Diversification Opportunities for Tencent Holdings and CarsalesCom
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tencent and CarsalesCom is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and CarsalesCom go up and down completely randomly.
Pair Corralation between Tencent Holdings and CarsalesCom
Assuming the 90 days trading horizon Tencent Holdings Ltd is expected to generate 1.49 times more return on investment than CarsalesCom. However, Tencent Holdings is 1.49 times more volatile than CarsalesCom. It trades about 0.06 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.08 per unit of risk. If you would invest 3,627 in Tencent Holdings Ltd on September 26, 2024 and sell it today you would earn a total of 1,573 from holding Tencent Holdings Ltd or generate 43.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Holdings Ltd vs. CarsalesCom
Performance |
| Timeline |
| Tencent Holdings |
| CarsalesCom |
Tencent Holdings and CarsalesCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and CarsalesCom
The main advantage of trading using opposite Tencent Holdings and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, CarsalesCom 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 CarsalesCom will offset losses from the drop in CarsalesCom's long position.| Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet | Tencent Holdings vs. Meta Platforms | Tencent Holdings vs. Meta Platforms |
| CarsalesCom vs. Alphabet Class A | CarsalesCom vs. Alphabet | CarsalesCom vs. Meta Platforms | CarsalesCom vs. Tencent Holdings Ltd |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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