Correlation Between Tencent Holdings and ANGI Homeservices

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

Diversification Opportunities for Tencent Holdings and ANGI Homeservices

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Tencent and ANGI Homeservices is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and ANGI Homeservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGI Homeservices 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 are associated (or correlated) with ANGI Homeservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGI Homeservices has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and ANGI Homeservices go up and down completely randomly.

Pair Corralation between Tencent Holdings and ANGI Homeservices

Assuming the 90 days horizon Tencent Holdings is expected to generate 0.79 times more return on investment than ANGI Homeservices. However, Tencent Holdings is 1.26 times less risky than ANGI Homeservices. It trades about 0.35 of its potential returns per unit of risk. ANGI Homeservices is currently generating about 0.16 per unit of risk. If you would invest  2,845  in Tencent Holdings on September 4, 2022 and sell it today you would earn a total of  941.00  from holding Tencent Holdings or generate 33.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Tencent Holdings  vs.  ANGI Homeservices

 Performance (%) 
       Timeline  
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 rather sound basic indicators, Tencent Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tencent Price Channel

ANGI Homeservices 
ANGI Homeservices Performance
0 of 100
Over the last 90 days ANGI Homeservices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ANGI Homeservices Price Channel

Tencent Holdings and ANGI Homeservices Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tencent Holdings and ANGI Homeservices

The main advantage of trading using opposite Tencent Holdings and ANGI Homeservices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, ANGI Homeservices 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 ANGI Homeservices will offset losses from the drop in ANGI Homeservices' long position.
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The idea behind Tencent Holdings and ANGI Homeservices 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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