Correlation Between Tencent Music and Addus HomeCare
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare, you can compare the effects of market volatilities on Tencent Music and Addus HomeCare 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 Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Addus HomeCare.
Diversification Opportunities for Tencent Music and Addus HomeCare
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and Addus is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Tencent Music i.e., Tencent Music and Addus HomeCare go up and down completely randomly.
Pair Corralation between Tencent Music and Addus HomeCare
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 0.89 times more return on investment than Addus HomeCare. However, Tencent Music Entertainment is 1.13 times less risky than Addus HomeCare. It trades about 0.05 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.04 per unit of risk. If you would invest 1,080 in Tencent Music Entertainment on August 29, 2024 and sell it today you would earn a total of 20.00 from holding Tencent Music Entertainment or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Addus HomeCare
Performance |
| Timeline |
| Tencent Music Entert |
| Addus HomeCare |
Tencent Music and Addus HomeCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Addus HomeCare
The main advantage of trading using opposite Tencent Music and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Addus HomeCare 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 Addus HomeCare will offset losses from the drop in Addus HomeCare's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| Addus HomeCare vs. Ramsay Health Care | Addus HomeCare vs. Superior Plus Corp | Addus HomeCare vs. NMI Holdings | Addus HomeCare vs. Origin Agritech |
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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