Correlation Between Tencent Holdings and Everquote Inc

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

Diversification Opportunities for Tencent Holdings and Everquote Inc

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Tencent and Everquote is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Everquote Inc Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everquote Inc 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 Everquote Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everquote Inc has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Everquote Inc go up and down completely randomly.

Pair Corralation between Tencent Holdings and Everquote Inc

Assuming the 90 days horizon Tencent Holdings is expected to generate 0.82 times more return on investment than Everquote Inc. However, Tencent Holdings is 1.21 times less risky than Everquote Inc. It trades about -0.03 of its potential returns per unit of risk. Everquote Inc Cl is currently generating about -0.03 per unit of risk. If you would invest  7,291  in Tencent Holdings on August 29, 2022 and sell it today you would lose (3,818)  from holding Tencent Holdings or give up 52.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Tencent Holdings  vs.  Everquote Inc Cl

 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 latest uncertain 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

Everquote Inc 
Everquote Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Everquote Inc Cl are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Everquote Inc reported solid returns over the last few months and may actually be approaching a breakup point.

Everquote Price Channel

Tencent Holdings and Everquote Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tencent Holdings and Everquote Inc

The main advantage of trading using opposite Tencent Holdings and Everquote Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Everquote Inc 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 Everquote Inc will offset losses from the drop in Everquote Inc's long position.
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The idea behind Tencent Holdings and Everquote Inc Cl 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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