Correlation Between Mediaalpha and Tencent Holdings

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

Diversification Opportunities for Mediaalpha and Tencent Holdings

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Mediaalpha and Tencent is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mediaalpha and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Mediaalpha 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 Mediaalpha 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 Mediaalpha i.e., Mediaalpha and Tencent Holdings go up and down completely randomly.

Pair Corralation between Mediaalpha and Tencent Holdings

Considering the 90-day investment horizon Mediaalpha is expected to under-perform the Tencent Holdings. In addition to that, Mediaalpha is 1.27 times more volatile than Tencent Holdings. It trades about -0.04 of its total potential returns per unit of risk. Tencent Holdings is currently generating about -0.04 per unit of volatility. If you would invest  7,611  in Tencent Holdings on September 2, 2022 and sell it today you would lose (3,952)  from holding Tencent Holdings or give up 51.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Mediaalpha  vs.  Tencent Holdings

 Performance (%) 
       Timeline  
Mediaalpha 
Mediaalpha Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mediaalpha are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mediaalpha showed solid returns over the last few months and may actually be approaching a breakup point.

Mediaalpha Price Channel

Tencent Holdings 
Tencent Performance
0 of 100
Over the last 90 days Tencent Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Tencent Price Channel

Mediaalpha and Tencent Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mediaalpha and Tencent Holdings

The main advantage of trading using opposite Mediaalpha and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mediaalpha 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.
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The idea behind Mediaalpha 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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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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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