Correlation Between Tencent Music and Gaming
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Gaming 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 Gaming 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 Gaming and Leisure, you can compare the effects of market volatilities on Tencent Music and Gaming 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 Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Gaming.
Diversification Opportunities for Tencent Music and Gaming
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and Gaming is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Gaming and Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming and Leisure 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 Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming and Leisure has no effect on the direction of Tencent Music i.e., Tencent Music and Gaming go up and down completely randomly.
Pair Corralation between Tencent Music and Gaming
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to under-perform the Gaming. In addition to that, Tencent Music is 1.28 times more volatile than Gaming and Leisure. It trades about -0.5 of its total potential returns per unit of risk. Gaming and Leisure is currently generating about 0.04 per unit of volatility. If you would invest 4,504 in Gaming and Leisure on October 20, 2024 and sell it today you would earn a total of 26.00 from holding Gaming and Leisure or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Gaming and Leisure
Performance |
| Timeline |
| Tencent Music Entert |
| Gaming and Leisure |
Tencent Music and Gaming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Gaming
The main advantage of trading using opposite Tencent Music and Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Gaming 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 Gaming will offset losses from the drop in Gaming's long position.| Tencent Music vs. EBRO FOODS | Tencent Music vs. LIFEWAY FOODS | Tencent Music vs. LPKF Laser Electronics | Tencent Music vs. Renesas Electronics |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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