Correlation Between Tencent Holdings and Genius Sports

Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Genius Sports 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 Genius Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tencent Holdings Ltd and Genius Sports, you can compare the effects of market volatilities on Tencent Holdings and Genius Sports 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 Genius Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Genius Sports.

Diversification Opportunities for Tencent Holdings and Genius Sports

-0.6

Correlation Coefficient

Tencent Holdings  Genius Sports

Excellent diversification

The 3 months correlation between Tencent and Genius is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and Genius Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Sports 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 Ltd are associated (or correlated) with Genius Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Sports has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Genius Sports go up and down completely randomly.

Pair Corralation between Tencent Holdings and Genius Sports

Assuming the 90 days horizon Tencent Holdings Ltd is expected to under-perform the Genius Sports. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tencent Holdings Ltd is 1.37 times less risky than Genius Sports. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Genius Sports is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  784.00  in Genius Sports on September 30, 2024 and sell it today you would earn a total of  91.00  from holding Genius Sports or generate 11.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Tencent Holdings Ltd  vs.  Genius Sports

Tencent Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tencent Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Tencent Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Genius Sports

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Genius Sports are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Genius Sports demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tencent Holdings and Genius Sports

The main advantage of trading using opposite Tencent Holdings and Genius Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Genius Sports 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 Genius Sports will offset losses from the drop in Genius Sports' long position.

The idea behind Tencent Holdings Ltd and Genius Sports pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.