Correlation Between Tencent Music and CSL
Can any of the company-specific risk be diversified away by investing in both Tencent Music and CSL 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 CSL 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 CSL Limited, you can compare the effects of market volatilities on Tencent Music and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and CSL.
Diversification Opportunities for Tencent Music and CSL
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tencent and CSL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of Tencent Music i.e., Tencent Music and CSL go up and down completely randomly.
Pair Corralation between Tencent Music and CSL
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 2.71 times more return on investment than CSL. However, Tencent Music is 2.71 times more volatile than CSL Limited. It trades about 0.27 of its potential returns per unit of risk. CSL Limited is currently generating about -0.09 per unit of risk. If you would invest 1,120 in Tencent Music Entertainment on November 27, 2024 and sell it today you would earn a total of 260.00 from holding Tencent Music Entertainment or generate 23.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. CSL Limited
Performance |
| Timeline |
| Tencent Music Entert |
| CSL Limited |
Tencent Music and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and CSL
The main advantage of trading using opposite Tencent Music and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Tencent Music vs. Alliance Data Systems | Tencent Music vs. DOCDATA | Tencent Music vs. NTT DATA | Tencent Music vs. Northern Data AG |
| CSL vs. GREENX METALS LTD | CSL vs. EMBARK EDUCATION LTD | CSL vs. GALENA MINING LTD | CSL vs. Laureate Education |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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