Correlation Between Tencent Holdings and SHOU HLDGS
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and SHOU HLDGS 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 SHOU HLDGS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and SHOU HLDGS LTD, you can compare the effects of market volatilities on Tencent Holdings and SHOU HLDGS 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 SHOU HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and SHOU HLDGS.
Diversification Opportunities for Tencent Holdings and SHOU HLDGS
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tencent and SHOU is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and SHOU HLDGS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHOU HLDGS LTD 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 SHOU HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHOU HLDGS LTD has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and SHOU HLDGS go up and down completely randomly.
Pair Corralation between Tencent Holdings and SHOU HLDGS
Assuming the 90 days trading horizon Tencent Holdings is expected to generate 3.39 times less return on investment than SHOU HLDGS. But when comparing it to its historical volatility, Tencent Holdings is 2.18 times less risky than SHOU HLDGS. It trades about 0.33 of its potential returns per unit of risk. SHOU HLDGS LTD is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 11.00 in SHOU HLDGS LTD on November 29, 2024 and sell it today you would earn a total of 11.00 from holding SHOU HLDGS LTD or generate 100.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Tencent Holdings vs. SHOU HLDGS LTD
Performance |
Timeline |
Tencent Holdings |
SHOU HLDGS LTD |
Tencent Holdings and SHOU HLDGS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tencent Holdings and SHOU HLDGS
The main advantage of trading using opposite Tencent Holdings and SHOU HLDGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, SHOU HLDGS 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 SHOU HLDGS will offset losses from the drop in SHOU HLDGS's long position.Tencent Holdings vs. BYD Company Limited | Tencent Holdings vs. Alibaba Group Holdings | Tencent Holdings vs. Xiaomi | Tencent Holdings vs. Baidu Inc |
SHOU HLDGS vs. Adtalem Global Education | SHOU HLDGS vs. EMBARK EDUCATION LTD | SHOU HLDGS vs. American Public Education | SHOU HLDGS vs. UNITED UTILITIES GP |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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