Correlation Between Visa and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Tencent Holdings, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Tencent Holdings.
Diversification Opportunities for Visa and Tencent Holdings
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and Tencent is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Visa 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 Visa Class A 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 Visa i.e., Visa and Tencent Holdings go up and down completely randomly.
Pair Corralation between Visa and Tencent Holdings
Taking into account the 90-day investment horizon Visa is expected to generate 1.22 times less return on investment than Tencent Holdings. But when comparing it to its historical volatility, Visa Class A is 2.47 times less risky than Tencent Holdings. It trades about 0.09 of its potential returns per unit of risk. Tencent Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,441 in Tencent Holdings on August 28, 2024 and sell it today you would earn a total of 1,662 from holding Tencent Holdings or generate 48.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Tencent Holdings
Performance |
| Timeline |
| Visa Class A |
| Tencent Holdings |
Visa and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Tencent Holdings
The main advantage of trading using opposite Visa and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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