Correlation Between Tencent Music and TITAN MACHINERY
Can any of the company-specific risk be diversified away by investing in both Tencent Music and TITAN MACHINERY 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 TITAN MACHINERY 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 TITAN MACHINERY, you can compare the effects of market volatilities on Tencent Music and TITAN MACHINERY 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 TITAN MACHINERY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and TITAN MACHINERY.
Diversification Opportunities for Tencent Music and TITAN MACHINERY
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and TITAN is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and TITAN MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TITAN MACHINERY 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 TITAN MACHINERY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TITAN MACHINERY has no effect on the direction of Tencent Music i.e., Tencent Music and TITAN MACHINERY go up and down completely randomly.
Pair Corralation between Tencent Music and TITAN MACHINERY
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.05 times more return on investment than TITAN MACHINERY. However, Tencent Music is 1.05 times more volatile than TITAN MACHINERY. It trades about 0.06 of its potential returns per unit of risk. TITAN MACHINERY is currently generating about -0.05 per unit of risk. If you would invest 786.00 in Tencent Music Entertainment on September 14, 2024 and sell it today you would earn a total of 334.00 from holding Tencent Music Entertainment or generate 42.49% 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. TITAN MACHINERY
Performance |
| Timeline |
| Tencent Music Entert |
| TITAN MACHINERY |
Tencent Music and TITAN MACHINERY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and TITAN MACHINERY
The main advantage of trading using opposite Tencent Music and TITAN MACHINERY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, TITAN MACHINERY 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 TITAN MACHINERY will offset losses from the drop in TITAN MACHINERY's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| TITAN MACHINERY vs. Apple Inc | TITAN MACHINERY vs. Apple Inc | TITAN MACHINERY vs. Apple Inc | TITAN MACHINERY vs. Apple Inc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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