Correlation Between Tencent Holdings and Exxon Mobil
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Exxon Mobil 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 Exxon Mobil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Exxon Mobil, you can compare the effects of market volatilities on Tencent Holdings and Exxon Mobil 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 Exxon Mobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Exxon Mobil.
Diversification Opportunities for Tencent Holdings and Exxon Mobil
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tencent and Exxon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Exxon Mobil go up and down completely randomly.
Pair Corralation between Tencent Holdings and Exxon Mobil
Assuming the 90 days trading horizon Tencent Holdings is expected to generate 1.72 times more return on investment than Exxon Mobil. However, Tencent Holdings is 1.72 times more volatile than Exxon Mobil. It trades about 0.07 of its potential returns per unit of risk. Exxon Mobil is currently generating about -0.02 per unit of risk. If you would invest 4,815 in Tencent Holdings on September 24, 2024 and sell it today you would earn a total of 460.00 from holding Tencent Holdings or generate 9.55% 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. Exxon Mobil
Performance |
Timeline |
Tencent Holdings |
Exxon Mobil |
Tencent Holdings and Exxon Mobil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tencent Holdings and Exxon Mobil
The main advantage of trading using opposite Tencent Holdings and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Exxon Mobil 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 Exxon Mobil will offset losses from the drop in Exxon Mobil's long position.Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet Class A | Tencent Holdings vs. Alphabet | Tencent Holdings vs. Meta Platforms |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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