Correlation Between Tencent Holdings and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Meta Platforms, you can compare the effects of market volatilities on Tencent Holdings and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Meta Platforms.
Diversification Opportunities for Tencent Holdings and Meta Platforms
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tencent and Meta is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Meta Platforms go up and down completely randomly.
Pair Corralation between Tencent Holdings and Meta Platforms
Assuming the 90 days trading horizon Tencent Holdings is expected to generate 1.46 times less return on investment than Meta Platforms. In addition to that, Tencent Holdings is 1.03 times more volatile than Meta Platforms. It trades about 0.06 of its total potential returns per unit of risk. Meta Platforms is currently generating about 0.09 per unit of volatility. If you would invest 52,226 in Meta Platforms on September 23, 2024 and sell it today you would earn a total of 3,764 from holding Meta Platforms or generate 7.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Tencent Holdings vs. Meta Platforms
Performance |
Timeline |
Tencent Holdings |
Meta Platforms |
Tencent Holdings and Meta Platforms Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tencent Holdings and Meta Platforms
The main advantage of trading using opposite Tencent Holdings and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet | Tencent Holdings vs. Meta Platforms |
Meta Platforms vs. Alphabet Class A | Meta Platforms vs. Alphabet Class A | Meta Platforms vs. Alphabet | Meta Platforms vs. Tencent Holdings Ltd |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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