Correlation Between Tencent Music and XLMedia PLC
Can any of the company-specific risk be diversified away by investing in both Tencent Music and XLMedia PLC 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 XLMedia PLC 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 XLMedia PLC, you can compare the effects of market volatilities on Tencent Music and XLMedia PLC 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 XLMedia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and XLMedia PLC.
Diversification Opportunities for Tencent Music and XLMedia PLC
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tencent and XLMedia is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Tencent Music i.e., Tencent Music and XLMedia PLC go up and down completely randomly.
Pair Corralation between Tencent Music and XLMedia PLC
Assuming the 90 days trading horizon Tencent Music is expected to generate 3.08 times less return on investment than XLMedia PLC. In addition to that, Tencent Music is 1.53 times more volatile than XLMedia PLC. It trades about 0.05 of its total potential returns per unit of risk. XLMedia PLC is currently generating about 0.21 per unit of volatility. If you would invest 13.00 in XLMedia PLC on August 29, 2024 and sell it today you would earn a total of 1.00 from holding XLMedia PLC or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. XLMedia PLC
Performance |
| Timeline |
| Tencent Music Entert |
| XLMedia PLC |
Tencent Music and XLMedia PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and XLMedia PLC
The main advantage of trading using opposite Tencent Music and XLMedia PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, XLMedia PLC 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 XLMedia PLC will offset losses from the drop in XLMedia PLC's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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