Correlation Between Tencent Holdings and Weibo Corp
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Weibo Corp 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 Weibo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Weibo Corp, you can compare the effects of market volatilities on Tencent Holdings and Weibo Corp 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 Weibo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Weibo Corp.
Diversification Opportunities for Tencent Holdings and Weibo Corp
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tencent and Weibo is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Weibo Corp go up and down completely randomly.
Pair Corralation between Tencent Holdings and Weibo Corp
Assuming the 90 days horizon Tencent Holdings is expected to generate 1.37 times less return on investment than Weibo Corp. In addition to that, Tencent Holdings is 1.13 times more volatile than Weibo Corp. It trades about 0.02 of its total potential returns per unit of risk. Weibo Corp is currently generating about 0.03 per unit of volatility. If you would invest 921.00 in Weibo Corp on October 25, 2024 and sell it today you would earn a total of 12.00 from holding Weibo Corp or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.44% |
| Values | Daily Returns |
Tencent Holdings vs. Weibo Corp
Performance |
| Timeline |
| Tencent Holdings |
| Weibo Corp |
Tencent Holdings and Weibo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and Weibo Corp
The main advantage of trading using opposite Tencent Holdings and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Weibo Corp 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 Weibo Corp will offset losses from the drop in Weibo Corp'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 |
| Weibo Corp vs. YY Inc Class | Weibo Corp vs. DouYu International Holdings | Weibo Corp vs. Tencent Music Entertainment | Weibo Corp vs. Autohome |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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