Correlation Between Tencent Holdings and BankInvest Optima

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Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and BankInvest Optima 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 BankInvest Optima 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 BankInvest Optima 30, you can compare the effects of market volatilities on Tencent Holdings and BankInvest Optima 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 BankInvest Optima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and BankInvest Optima.

Diversification Opportunities for Tencent Holdings and BankInvest Optima

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Tencent and BankInvest is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings Ltd and BankInvest Optima 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Optima 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 BankInvest Optima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Optima has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and BankInvest Optima go up and down completely randomly.

Pair Corralation between Tencent Holdings and BankInvest Optima

Assuming the 90 days horizon Tencent Holdings Ltd is expected to generate 6.69 times more return on investment than BankInvest Optima. However, Tencent Holdings is 6.69 times more volatile than BankInvest Optima 30. It trades about 0.44 of its potential returns per unit of risk. BankInvest Optima 30 is currently generating about -0.2 per unit of risk. If you would invest  3,695  in Tencent Holdings Ltd on January 25, 2024 and sell it today you would earn a total of  690.00  from holding Tencent Holdings Ltd or generate 18.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy90.91%
ValuesDaily Returns

Tencent Holdings Ltd  vs.  BankInvest Optima 30

 Performance 
       Timeline  
Tencent Holdings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings Ltd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, Tencent Holdings showed solid returns over the last few months and may actually be approaching a breakup point.
BankInvest Optima 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tencent Holdings and BankInvest Optima Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tencent Holdings and BankInvest Optima

The main advantage of trading using opposite Tencent Holdings and BankInvest Optima positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, BankInvest Optima 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 BankInvest Optima will offset losses from the drop in BankInvest Optima's long position.
The idea behind Tencent Holdings Ltd and BankInvest Optima 30 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 the AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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