Correlation Between YY and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both YY 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 YY and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YY Inc Class and Tencent Holdings, you can compare the effects of market volatilities on YY 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 YY with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of YY and Tencent Holdings.
Diversification Opportunities for YY and Tencent Holdings
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between YY and Tencent is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and YY 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 YY Inc Class 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 YY i.e., YY and Tencent Holdings go up and down completely randomly.
Pair Corralation between YY and Tencent Holdings
Allowing for the 90-day total investment horizon YY is expected to generate 2.18 times less return on investment than Tencent Holdings. In addition to that, YY is 1.03 times more volatile than Tencent Holdings. It trades about 0.18 of its total potential returns per unit of risk. Tencent Holdings is currently generating about 0.41 per unit of volatility. If you would invest 4,991 in Tencent Holdings on November 18, 2024 and sell it today you would earn a total of 1,179 from holding Tencent Holdings or generate 23.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
YY Inc Class vs. Tencent Holdings
Performance |
| Timeline |
| YY Inc Class |
| Tencent Holdings |
YY and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with YY and Tencent Holdings
The main advantage of trading using opposite YY and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YY 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.| YY vs. Weibo Corp | YY vs. DouYu International Holdings | YY vs. Tencent Music Entertainment | YY 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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