Correlation Between Weibo Corp and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Weibo Corp 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 Weibo Corp and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weibo Corp and Tencent Holdings, you can compare the effects of market volatilities on Weibo Corp 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 Weibo Corp with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weibo Corp and Tencent Holdings.
Diversification Opportunities for Weibo Corp and Tencent Holdings
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Weibo and Tencent is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and Tencent Holdings go up and down completely randomly.
Pair Corralation between Weibo Corp and Tencent Holdings
Allowing for the 90-day total investment horizon Weibo Corp is expected to under-perform the Tencent Holdings. In addition to that, Weibo Corp is 1.35 times more volatile than Tencent Holdings. It trades about -0.1 of its total potential returns per unit of risk. Tencent Holdings is currently generating about -0.11 per unit of volatility. If you would invest 5,397 in Tencent Holdings on August 27, 2024 and sell it today you would lose (294.00) from holding Tencent Holdings or give up 5.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weibo Corp vs. Tencent Holdings
Performance |
| Timeline |
| Weibo Corp |
| Tencent Holdings |
Weibo Corp and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weibo Corp and Tencent Holdings
The main advantage of trading using opposite Weibo Corp and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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.| Weibo Corp vs. YY Inc Class | Weibo Corp vs. DouYu International Holdings | Weibo Corp vs. Tencent Music Entertainment | Weibo Corp vs. Autohome |
| 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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