Correlation Between Tencent Music and Fresenius
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Fresenius 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 Fresenius 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 Fresenius SE Co, you can compare the effects of market volatilities on Tencent Music and Fresenius 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 Fresenius. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Fresenius.
Diversification Opportunities for Tencent Music and Fresenius
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tencent and Fresenius is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Tencent Music i.e., Tencent Music and Fresenius go up and down completely randomly.
Pair Corralation between Tencent Music and Fresenius
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 3.11 times more return on investment than Fresenius. However, Tencent Music is 3.11 times more volatile than Fresenius SE Co. It trades about 0.23 of its potential returns per unit of risk. Fresenius SE Co is currently generating about 0.2 per unit of risk. If you would invest 1,020 in Tencent Music Entertainment on September 13, 2024 and sell it today you would earn a total of 160.00 from holding Tencent Music Entertainment or generate 15.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Fresenius SE Co
Performance |
| Timeline |
| Tencent Music Entert |
| Fresenius SE |
Tencent Music and Fresenius Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Fresenius
The main advantage of trading using opposite Tencent Music and Fresenius positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Fresenius 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 Fresenius will offset losses from the drop in Fresenius' long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| Fresenius vs. Tencent Music Entertainment | Fresenius vs. PROSIEBENSAT1 MEDIADR4 | Fresenius vs. China Communications Services | Fresenius vs. Entravision Communications |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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