Correlation Between STMICROELECTRONICS and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS 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 STMICROELECTRONICS and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMICROELECTRONICS and Tencent Holdings Ltd, you can compare the effects of market volatilities on STMICROELECTRONICS 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 STMICROELECTRONICS with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and Tencent Holdings.
Diversification Opportunities for STMICROELECTRONICS and Tencent Holdings
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMICROELECTRONICS and Tencent is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS i.e., STMICROELECTRONICS and Tencent Holdings go up and down completely randomly.
Pair Corralation between STMICROELECTRONICS and Tencent Holdings
Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the Tencent Holdings. In addition to that, STMICROELECTRONICS is 1.12 times more volatile than Tencent Holdings Ltd. It trades about -0.16 of its total potential returns per unit of risk. Tencent Holdings Ltd is currently generating about -0.04 per unit of volatility. If you would invest 4,940 in Tencent Holdings Ltd on August 30, 2024 and sell it today you would lose (100.00) from holding Tencent Holdings Ltd or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMICROELECTRONICS vs. Tencent Holdings Ltd
Performance |
| Timeline |
| STMICROELECTRONICS |
| Tencent Holdings |
STMICROELECTRONICS and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMICROELECTRONICS and Tencent Holdings
The main advantage of trading using opposite STMICROELECTRONICS and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS 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.| STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Superior Plus Corp | STMICROELECTRONICS vs. SIVERS SEMICONDUCTORS AB |
| Tencent Holdings vs. STMICROELECTRONICS | Tencent Holdings vs. Richardson Electronics | Tencent Holdings vs. ELECTRONIC ARTS | Tencent Holdings vs. UET United Electronic |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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