Correlation Between Tencent Holdings and Farmhouse
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Farmhouse 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 Farmhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Farmhouse, you can compare the effects of market volatilities on Tencent Holdings and Farmhouse 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 Farmhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Farmhouse.
Diversification Opportunities for Tencent Holdings and Farmhouse
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tencent and Farmhouse is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Farmhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmhouse 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 Farmhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmhouse has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Farmhouse go up and down completely randomly.
Pair Corralation between Tencent Holdings and Farmhouse
Assuming the 90 days horizon Tencent Holdings is expected to generate 41.69 times less return on investment than Farmhouse. But when comparing it to its historical volatility, Tencent Holdings is 13.1 times less risky than Farmhouse. It trades about 0.04 of its potential returns per unit of risk. Farmhouse is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9.90 in Farmhouse on August 29, 2024 and sell it today you would earn a total of 12.10 from holding Farmhouse or generate 122.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Holdings vs. Farmhouse
Performance |
| Timeline |
| Tencent Holdings |
| Farmhouse |
Tencent Holdings and Farmhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and Farmhouse
The main advantage of trading using opposite Tencent Holdings and Farmhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Farmhouse 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 Farmhouse will offset losses from the drop in Farmhouse's long position.| Tencent Holdings vs. Autohome | Tencent Holdings vs. Arena Group Holdings | Tencent Holdings vs. Golden Grail Technology | Tencent Holdings vs. Asset Entities Class |
| Farmhouse vs. Powerstorm Holdings | Farmhouse vs. Phonex Inc | Farmhouse vs. Greystone Logistics | Farmhouse vs. Fortran Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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