Correlation Between SCANSOURCE and Tencent Holdings

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

Diversification Opportunities for SCANSOURCE and Tencent Holdings

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between SCANSOURCE and Tencent is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and SCANSOURCE 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 SCANSOURCE 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 SCANSOURCE i.e., SCANSOURCE and Tencent Holdings go up and down completely randomly.

Pair Corralation between SCANSOURCE and Tencent Holdings

Assuming the 90 days trading horizon SCANSOURCE is expected to generate 1.14 times more return on investment than Tencent Holdings. However, SCANSOURCE is 1.14 times more volatile than Tencent Holdings Ltd. It trades about 0.17 of its potential returns per unit of risk. Tencent Holdings Ltd is currently generating about 0.1 per unit of risk. If you would invest  2,740  in SCANSOURCE on April 22, 2025 and sell it today you would earn a total of  680.00  from holding SCANSOURCE or generate 24.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

SCANSOURCE  vs.  Tencent Holdings Ltd

 Performance 
       Timeline  
SCANSOURCE 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SCANSOURCE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SCANSOURCE unveiled solid returns over the last few months and may actually be approaching a breakup point.
Tencent Holdings 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings Ltd are ranked lower than 8 (%) 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.

SCANSOURCE and Tencent Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SCANSOURCE and Tencent Holdings

The main advantage of trading using opposite SCANSOURCE and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCANSOURCE 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 SCANSOURCE 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.
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 the Global Correlations module to find global opportunities by holding instruments from different markets.

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