Correlation Between Tencent Holdings and Hello
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Hello 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 Hello into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Hello Group, you can compare the effects of market volatilities on Tencent Holdings and Hello 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 Hello. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Hello.
Diversification Opportunities for Tencent Holdings and Hello
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tencent and Hello is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Hello Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hello Group 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 Hello. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hello Group has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Hello go up and down completely randomly.
Pair Corralation between Tencent Holdings and Hello
Assuming the 90 days horizon Tencent Holdings is expected to generate 0.85 times more return on investment than Hello. However, Tencent Holdings is 1.17 times less risky than Hello. It trades about 0.05 of its potential returns per unit of risk. Hello Group is currently generating about 0.02 per unit of risk. 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Holdings vs. Hello Group
Performance |
| Timeline |
| Tencent Holdings |
| Hello Group |
Tencent Holdings and Hello Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and Hello
The main advantage of trading using opposite Tencent Holdings and Hello positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Hello 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 Hello will offset losses from the drop in Hello'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 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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