Correlation Between Tencent Holdings and MoneyHero Limited

Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and MoneyHero Limited 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 MoneyHero Limited 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 MoneyHero Limited Class, you can compare the effects of market volatilities on Tencent Holdings and MoneyHero Limited 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 MoneyHero Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and MoneyHero Limited.

Diversification Opportunities for Tencent Holdings and MoneyHero Limited

-0.37

Correlation Coefficient

Tencent Holdings  MoneyHero Limited

Very good diversification

The 3 months correlation between Tencent and MoneyHero is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and MoneyHero Limited Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MoneyHero Limited Class 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 MoneyHero Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MoneyHero Limited Class has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and MoneyHero Limited go up and down completely randomly.

Pair Corralation between Tencent Holdings and MoneyHero Limited

Assuming the 90 days horizon Tencent Holdings Ltd is expected to generate 0.87 times more return on investment than MoneyHero Limited. However, Tencent Holdings Ltd is 1.14 times less risky than MoneyHero Limited. It trades about 0.02 of its potential returns per unit of risk. MoneyHero Limited Class is currently generating about -0.03 per unit of risk. If you would invest  5,364  in Tencent Holdings Ltd on September 24, 2024 and sell it today you would earn a total of  104.00  from holding Tencent Holdings Ltd or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Tencent Holdings Ltd  vs.  MoneyHero Limited Class

Tencent Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

MoneyHero Limited Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tencent Holdings and MoneyHero Limited

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

The idea behind Tencent Holdings Ltd and MoneyHero Limited Class 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.