Correlation Between Vanguard Funds and Tencent Holdings

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

By analyzing existing cross correlation between Vanguard Funds Public and Tencent Holdings, you can compare the effects of market volatilities on Vanguard Funds 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 Vanguard Funds with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and Tencent Holdings.

Diversification Opportunities for Vanguard Funds and Tencent Holdings

-0.08

Correlation Coefficient

Vanguard Funds  Tencent Holdings

Good diversification

The 3 months correlation between Vanguard and Tencent is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Vanguard Funds 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 Vanguard Funds Public 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 Vanguard Funds i.e., Vanguard Funds and Tencent Holdings go up and down completely randomly.

Pair Corralation between Vanguard Funds and Tencent Holdings

Assuming the 90 days trading horizon Vanguard Funds Public is expected to generate 0.32 times more return on investment than Tencent Holdings. However, Vanguard Funds Public is 3.13 times less risky than Tencent Holdings. It trades about 0.22 of its potential returns per unit of risk. Tencent Holdings is currently generating about 0.07 per unit of risk. If you would invest  9,724  in Vanguard Funds Public on September 21, 2024 and sell it today you would earn a total of  1,188  from holding Vanguard Funds Public or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vanguard Funds Public  vs.  Tencent Holdings

Vanguard Funds Public

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vanguard Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tencent Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Funds and Tencent Holdings

The main advantage of trading using opposite Vanguard Funds and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Funds 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.

The idea behind Vanguard Funds Public and Tencent Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.