Correlation Between Tencent Music and Townsquare Media
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Townsquare Media 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 Townsquare Media 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 Townsquare Media, you can compare the effects of market volatilities on Tencent Music and Townsquare Media 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 Townsquare Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Townsquare Media.
Diversification Opportunities for Tencent Music and Townsquare Media
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and Townsquare is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Tencent Music i.e., Tencent Music and Townsquare Media go up and down completely randomly.
Pair Corralation between Tencent Music and Townsquare Media
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.05 times more return on investment than Townsquare Media. However, Tencent Music is 1.05 times more volatile than Townsquare Media. It trades about 0.02 of its potential returns per unit of risk. Townsquare Media is currently generating about -0.03 per unit of risk. If you would invest 1,060 in Tencent Music Entertainment on October 25, 2024 and sell it today you would earn a total of 10.00 from holding Tencent Music Entertainment or generate 0.94% 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. Townsquare Media
Performance |
| Timeline |
| Tencent Music Entert |
| Townsquare Media |
Tencent Music and Townsquare Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Townsquare Media
The main advantage of trading using opposite Tencent Music and Townsquare Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Townsquare Media 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 Townsquare Media will offset losses from the drop in Townsquare Media's long position.| Tencent Music vs. Globex Mining Enterprises | Tencent Music vs. GBS Software AG | Tencent Music vs. Check Point Software | Tencent Music vs. USU Software AG |
| Townsquare Media vs. Xtrackers LevDAX | Townsquare Media vs. Lyxor 1 | Townsquare Media vs. Xtrackers ShortDAX |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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