Correlation Between SoftBank Group and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both SoftBank Group 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 SoftBank Group and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SoftBank Group Corp and Tencent Holdings, you can compare the effects of market volatilities on SoftBank Group 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 SoftBank Group with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoftBank Group and Tencent Holdings.
Diversification Opportunities for SoftBank Group and Tencent Holdings
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SoftBank and Tencent is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and SoftBank Group 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 SoftBank Group Corp 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 SoftBank Group i.e., SoftBank Group and Tencent Holdings go up and down completely randomly.
Pair Corralation between SoftBank Group and Tencent Holdings
Assuming the 90 days horizon SoftBank Group Corp is expected to generate 1.24 times more return on investment than Tencent Holdings. However, SoftBank Group is 1.24 times more volatile than Tencent Holdings. It trades about 0.01 of its potential returns per unit of risk. Tencent Holdings is currently generating about -0.07 per unit of risk. If you would invest 5,580 in SoftBank Group Corp on August 30, 2024 and sell it today you would lose (20.00) from holding SoftBank Group Corp or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SoftBank Group Corp vs. Tencent Holdings
Performance |
| Timeline |
| SoftBank Group Corp |
| Tencent Holdings |
SoftBank Group and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SoftBank Group and Tencent Holdings
The main advantage of trading using opposite SoftBank Group and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Group 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.| SoftBank Group vs. Tencent Holdings | SoftBank Group vs. BYD Company Limited | SoftBank Group vs. Geely Automobile Holdings | SoftBank Group vs. Baidu Inc |
| Tencent Holdings vs. BYD Company Limited | Tencent Holdings vs. Alibaba Group Holdings | Tencent Holdings vs. Xiaomi | Tencent Holdings vs. Baidu Inc |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |