Correlation Between Tencent Music and Air Lease
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Air Lease 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 Air Lease 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 Air Lease, you can compare the effects of market volatilities on Tencent Music and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Air Lease.
Diversification Opportunities for Tencent Music and Air Lease
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tencent and Air is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Tencent Music i.e., Tencent Music and Air Lease go up and down completely randomly.
Pair Corralation between Tencent Music and Air Lease
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.79 times more return on investment than Air Lease. However, Tencent Music is 1.79 times more volatile than Air Lease. It trades about 0.08 of its potential returns per unit of risk. Air Lease is currently generating about 0.04 per unit of risk. If you would invest 602.00 in Tencent Music Entertainment on September 12, 2024 and sell it today you would earn a total of 638.00 from holding Tencent Music Entertainment or generate 105.98% 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. Air Lease
Performance |
| Timeline |
| Tencent Music Entert |
| Air Lease |
Tencent Music and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Air Lease
The main advantage of trading using opposite Tencent Music and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| Air Lease vs. United Rentals | Air Lease vs. WillScot Mobile Mini | Air Lease vs. Superior Plus Corp | Air Lease vs. SIVERS SEMICONDUCTORS AB |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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