Correlation Between Arena Group and Tencent Holdings

Can any of the company-specific risk be diversified away by investing in both Arena Group 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 Arena Group and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arena Group Holdings and Tencent Holdings Ltd, you can compare the effects of market volatilities on Arena Group 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 Arena Group with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arena Group and Tencent Holdings.

Diversification Opportunities for Arena Group and Tencent Holdings

-0.73

Correlation Coefficient

Arena Group  Tencent Holdings

Pay attention - limited upside

The 3 months correlation between Arena and Tencent is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Arena Group Holdings and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Arena Group 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 Arena Group Holdings 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 Arena Group i.e., Arena Group and Tencent Holdings go up and down completely randomly.

Pair Corralation between Arena Group and Tencent Holdings

Given the investment horizon of 90 days Arena Group Holdings is expected to under-perform the Tencent Holdings. In addition to that, Arena Group is 2.7 times more volatile than Tencent Holdings Ltd. It trades about -0.2 of its total potential returns per unit of risk. Tencent Holdings Ltd is currently generating about 0.35 per unit of volatility. If you would invest  3,882  in Tencent Holdings Ltd on January 31, 2024 and sell it today you would earn a total of  559.00  from holding Tencent Holdings Ltd or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Arena Group Holdings  vs.  Tencent Holdings Ltd

Arena Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tencent Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings Ltd are ranked lower than 18 (%) 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.

Pair Trading with Arena Group and Tencent Holdings

The main advantage of trading using opposite Arena Group and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arena Group 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.

The idea behind Arena Group Holdings and Tencent Holdings Ltd 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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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.