Correlation Between CITIC Resources and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both CITIC Resources 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 CITIC Resources and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITIC Resources Holdings and Tencent Holdings, you can compare the effects of market volatilities on CITIC Resources 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 CITIC Resources with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Resources and Tencent Holdings.
Diversification Opportunities for CITIC Resources and Tencent Holdings
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CITIC and Tencent is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Resources Holdings and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and CITIC Resources 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 CITIC Resources Holdings 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 CITIC Resources i.e., CITIC Resources and Tencent Holdings go up and down completely randomly.
Pair Corralation between CITIC Resources and Tencent Holdings
Assuming the 90 days horizon CITIC Resources is expected to generate 1.18 times less return on investment than Tencent Holdings. In addition to that, CITIC Resources is 1.83 times more volatile than Tencent Holdings. It trades about 0.18 of its total potential returns per unit of risk. Tencent Holdings is currently generating about 0.38 per unit of volatility. If you would invest 3,760 in Tencent Holdings on January 26, 2024 and sell it today you would earn a total of 595.00 from holding Tencent Holdings or generate 15.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CITIC Resources Holdings vs. Tencent Holdings
Performance |
| Timeline |
| CITIC Resources Holdings |
| Tencent Holdings |
CITIC Resources and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITIC Resources and Tencent Holdings
The main advantage of trading using opposite CITIC Resources and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Resources 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.| CITIC Resources vs. Churchill Resources | CITIC Resources vs. Western Troy Capital | CITIC Resources vs. Beyond Minerals | CITIC Resources vs. Altius Minerals |
| Tencent Holdings vs. Twilio Inc | Tencent Holdings vs. Snap Inc | Tencent Holdings vs. Alphabet Inc Class A | Tencent Holdings vs. Pinterest |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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