Correlation Between Trump Media and Tencent Holdings

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

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

Diversification Opportunities for Trump Media and Tencent Holdings

0.45

Correlation Coefficient

Trump Media  Tencent Holdings

Very weak diversification

The 3 months correlation between Trump and Tencent is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Trump Media Technology and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Trump Media 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 Trump Media Technology 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 Trump Media i.e., Trump Media and Tencent Holdings go up and down completely randomly.

Pair Corralation between Trump Media and Tencent Holdings

Considering the 90-day investment horizon Trump Media Technology is expected to under-perform the Tencent Holdings. In addition to that, Trump Media is 2.32 times more volatile than Tencent Holdings Ltd. It trades about -0.21 of its total potential returns per unit of risk. Tencent Holdings Ltd is currently generating about 0.11 per unit of volatility. If you would invest  4,723  in Tencent Holdings Ltd on March 10, 2024 and sell it today you would earn a total of  176.00  from holding Tencent Holdings Ltd or generate 3.73% return on investment over 90 days.

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

Trump Media Technology  vs.  Tencent Holdings Ltd

Trump Media Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trump Media Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking indicators, Trump Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tencent Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Holdings Ltd are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Tencent Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trump Media and Tencent Holdings

The main advantage of trading using opposite Trump Media and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trump Media 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 Trump Media Technology 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.