Correlation Between Tencent Music and NEXON Co
Can any of the company-specific risk be diversified away by investing in both Tencent Music and NEXON Co 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 NEXON Co 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 NEXON Co, you can compare the effects of market volatilities on Tencent Music and NEXON Co 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 NEXON Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and NEXON Co.
Diversification Opportunities for Tencent Music and NEXON Co
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and NEXON is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON Co 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 NEXON Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON Co has no effect on the direction of Tencent Music i.e., Tencent Music and NEXON Co go up and down completely randomly.
Pair Corralation between Tencent Music and NEXON Co
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 0.67 times more return on investment than NEXON Co. However, Tencent Music Entertainment is 1.5 times less risky than NEXON Co. It trades about 0.05 of its potential returns per unit of risk. NEXON Co is currently generating about -0.23 per unit of risk. If you would invest 1,020 in Tencent Music Entertainment on September 1, 2024 and sell it today you would earn a total of 20.00 from holding Tencent Music Entertainment or generate 1.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Tencent Music Entertainment vs. NEXON Co
Performance |
| Timeline |
| Tencent Music Entert |
| NEXON Co |
Tencent Music and NEXON Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and NEXON Co
The main advantage of trading using opposite Tencent Music and NEXON Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, NEXON Co 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 NEXON Co will offset losses from the drop in NEXON Co's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| NEXON Co vs. Tencent Music Entertainment | NEXON Co vs. INTER CARS SA | NEXON Co vs. GEAR4MUSIC LS 10 | NEXON Co vs. SIEM OFFSHORE NEW |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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