Correlation Between TrueCar and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both TrueCar 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 TrueCar and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TrueCar and Tencent Holdings, you can compare the effects of market volatilities on TrueCar 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 TrueCar with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of TrueCar and Tencent Holdings.
Diversification Opportunities for TrueCar and Tencent Holdings
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TrueCar and Tencent is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and TrueCar 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 TrueCar 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 TrueCar i.e., TrueCar and Tencent Holdings go up and down completely randomly.
Pair Corralation between TrueCar and Tencent Holdings
Given the investment horizon of 90 days TrueCar is expected to under-perform the Tencent Holdings. In addition to that, TrueCar is 1.03 times more volatile than Tencent Holdings. It trades about -0.13 of its total potential returns per unit of risk. Tencent Holdings is currently generating about 0.02 per unit of volatility. If you would invest 4,960 in Tencent Holdings on October 25, 2024 and sell it today you would earn a total of 13.00 from holding Tencent Holdings or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.44% |
| Values | Daily Returns |
TrueCar vs. Tencent Holdings
Performance |
| Timeline |
| TrueCar |
| Tencent Holdings |
TrueCar and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TrueCar and Tencent Holdings
The main advantage of trading using opposite TrueCar and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueCar 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.The idea behind TrueCar and Tencent Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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