Correlation Between Tencent Holdings and SalMar ASA
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and SalMar ASA 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 SalMar ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and SalMar ASA, you can compare the effects of market volatilities on Tencent Holdings and SalMar ASA 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 SalMar ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and SalMar ASA.
Diversification Opportunities for Tencent Holdings and SalMar ASA
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tencent and SalMar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA 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 are associated (or correlated) with SalMar ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalMar ASA has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and SalMar ASA go up and down completely randomly.
Pair Corralation between Tencent Holdings and SalMar ASA
Assuming the 90 days trading horizon Tencent Holdings is expected to generate 1.57 times more return on investment than SalMar ASA. However, Tencent Holdings is 1.57 times more volatile than SalMar ASA. It trades about 0.08 of its potential returns per unit of risk. SalMar ASA is currently generating about 0.06 per unit of risk. If you would invest 4,362 in Tencent Holdings on September 3, 2024 and sell it today you would earn a total of 501.00 from holding Tencent Holdings or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Holdings vs. SalMar ASA
Performance |
| Timeline |
| Tencent Holdings |
| SalMar ASA |
Tencent Holdings and SalMar ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and SalMar ASA
The main advantage of trading using opposite Tencent Holdings and SalMar ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, SalMar ASA 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 SalMar ASA will offset losses from the drop in SalMar ASA's long position.| Tencent Holdings vs. BYD Company Limited | Tencent Holdings vs. Alibaba Group Holdings | Tencent Holdings vs. Xiaomi | Tencent Holdings vs. Baidu Inc |
| SalMar ASA vs. Cal Maine Foods | SalMar ASA vs. Sumitomo Mitsui Construction | SalMar ASA vs. Dairy Farm International | SalMar ASA vs. Food Life Companies |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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