Correlation Between Tencent Holdings and Alphabet

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

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

Diversification Opportunities for Tencent Holdings and Alphabet

0.61

Correlation Coefficient

Tencent Holdings  Alphabet

Poor diversification

The 3 months correlation between Tencent and Alphabet is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Alphabet go up and down completely randomly.

Pair Corralation between Tencent Holdings and Alphabet

Assuming the 90 days trading horizon Tencent Holdings is expected to under-perform the Alphabet. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Holdings is 1.5 times less risky than Alphabet. The stock trades about -0.33 of its potential returns per unit of risk. The Alphabet is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  15,382  in Alphabet on April 7, 2025 and sell it today you would lose (242.00) from holding Alphabet or give up 1.57% of portfolio value over 90 days.

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

Tencent Holdings  vs.  Alphabet

Tencent Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Holdings may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Alphabet

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tencent Holdings and Alphabet

The main advantage of trading using opposite Tencent Holdings and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.

The idea behind Tencent Holdings and Alphabet 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..