Correlation Between Tencent Music and Ares Management
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Ares Management 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 Music and Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Music Entertainment and Ares Management Corp, you can compare the effects of market volatilities on Tencent Music and Ares Management 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 Music with a short position of Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Ares Management.
Diversification Opportunities for Tencent Music and Ares Management
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tencent and Ares is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp and Tencent Music 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 Music Entertainment are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of Tencent Music i.e., Tencent Music and Ares Management go up and down completely randomly.
Pair Corralation between Tencent Music and Ares Management
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.93 times more return on investment than Ares Management. However, Tencent Music is 1.93 times more volatile than Ares Management Corp. It trades about 0.09 of its potential returns per unit of risk. Ares Management Corp is currently generating about 0.03 per unit of risk. If you would invest 1,060 in Tencent Music Entertainment on September 26, 2024 and sell it today you would earn a total of 60.00 from holding Tencent Music Entertainment or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Ares Management Corp
Performance |
| Timeline |
| Tencent Music Entert |
| Ares Management Corp |
Tencent Music and Ares Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Ares Management
The main advantage of trading using opposite Tencent Music and Ares Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Ares Management 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 Ares Management will offset losses from the drop in Ares Management's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| Ares Management vs. Grupo Carso SAB | Ares Management vs. MUTUIONLINE | Ares Management vs. CECO ENVIRONMENTAL | Ares Management vs. RELIANCE STEEL AL |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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