Correlation Between Sohu Inc and Nielsen Holdings

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Can any of the company-specific risk be diversified away by investing in both Sohu Inc and Nielsen 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 Sohu Inc and Nielsen Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sohu Inc ADR and Nielsen Holdings Plc, you can compare the effects of market volatilities on Sohu Inc and Nielsen 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 Sohu Inc with a short position of Nielsen Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sohu Inc and Nielsen Holdings.

Diversification Opportunities for Sohu Inc and Nielsen Holdings

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sohu Inc and Nielsen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sohu Inc ADR and Nielsen Holdings Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nielsen Holdings Plc and Sohu Inc 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 Sohu Inc ADR are associated (or correlated) with Nielsen Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nielsen Holdings Plc has no effect on the direction of Sohu Inc i.e., Sohu Inc and Nielsen Holdings go up and down completely randomly.

Pair Corralation between Sohu Inc and Nielsen Holdings

Given the investment horizon of 90 days Sohu Inc is expected to generate 4.12 times less return on investment than Nielsen Holdings. In addition to that, Sohu Inc is 1.28 times more volatile than Nielsen Holdings Plc. It trades about 0.01 of its total potential returns per unit of risk. Nielsen Holdings Plc is currently generating about 0.06 per unit of volatility. If you would invest  1,461  in Nielsen Holdings Plc on May 13, 2022 and sell it today you would earn a total of  1,283  from holding Nielsen Holdings Plc or generate 87.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sohu Inc ADR  vs.  Nielsen Holdings Plc

 Performance (%) 
       Timeline  
Sohu Inc ADR 
Sohu Inc Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sohu Inc ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical indicators, Sohu Inc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sohu Inc Price Channel

Nielsen Holdings Plc 
Nielsen Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nielsen Holdings Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Nielsen Holdings may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Nielsen Price Channel

Sohu Inc and Nielsen Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sohu Inc and Nielsen Holdings

The main advantage of trading using opposite Sohu Inc and Nielsen Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sohu Inc position performs unexpectedly, Nielsen 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 Nielsen Holdings will offset losses from the drop in Nielsen Holdings' long position.
The idea behind Sohu Inc ADR and Nielsen Holdings Plc 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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