Correlation Between Prosus and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Prosus and Tencent Holdings 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 Prosus and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus and Tencent Holdings, you can compare the effects of market volatilities on Prosus and Tencent Holdings 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 Prosus with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus and Tencent Holdings.
Diversification Opportunities for Prosus and Tencent Holdings
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prosus and Tencent is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Prosus and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Prosus 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 Prosus are associated (or correlated) with Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of Prosus i.e., Prosus and Tencent Holdings go up and down completely randomly.
Pair Corralation between Prosus and Tencent Holdings
Assuming the 90 days horizon Prosus is expected to generate 1.25 times less return on investment than Tencent Holdings. But when comparing it to its historical volatility, Prosus is 1.3 times less risky than Tencent Holdings. It trades about 0.05 of its potential returns per unit of risk. Tencent Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,060 in Tencent Holdings on August 24, 2024 and sell it today you would earn a total of 1,075 from holding Tencent Holdings or generate 26.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosus vs. Tencent Holdings
Performance |
| Timeline |
| Prosus |
| Tencent Holdings |
Prosus and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus and Tencent Holdings
The main advantage of trading using opposite Prosus and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus position performs unexpectedly, Tencent Holdings 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 Tencent Holdings will offset losses from the drop in Tencent Holdings' long position.| Prosus vs. Tencent Holdings | Prosus vs. Trivago NV | Prosus vs. YY Inc Class | Prosus vs. DouYu International Holdings |
| Tencent Holdings vs. Autohome | Tencent Holdings vs. Arena Group Holdings | Tencent Holdings vs. Golden Grail Technology | Tencent Holdings vs. Asset Entities Class |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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