Correlation Between Tencent Music and HK Electric
Can any of the company-specific risk be diversified away by investing in both Tencent Music and HK Electric 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 HK Electric 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 HK Electric Investments, you can compare the effects of market volatilities on Tencent Music and HK Electric 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 HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and HK Electric.
Diversification Opportunities for Tencent Music and HK Electric
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and HKT is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments 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 HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of Tencent Music i.e., Tencent Music and HK Electric go up and down completely randomly.
Pair Corralation between Tencent Music and HK Electric
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 3.85 times more return on investment than HK Electric. However, Tencent Music is 3.85 times more volatile than HK Electric Investments. It trades about 0.08 of its potential returns per unit of risk. HK Electric Investments is currently generating about 0.07 per unit of risk. If you would invest 845.00 in Tencent Music Entertainment on October 18, 2024 and sell it today you would earn a total of 155.00 from holding Tencent Music Entertainment or generate 18.34% 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. HK Electric Investments
Performance |
| Timeline |
| Tencent Music Entert |
| HK Electric Investments |
Tencent Music and HK Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and HK Electric
The main advantage of trading using opposite Tencent Music and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, HK Electric 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 HK Electric will offset losses from the drop in HK Electric's long position.| Tencent Music vs. NIGHTINGALE HEALTH EO | Tencent Music vs. SOCKET MOBILE NEW | Tencent Music vs. T MOBILE US | Tencent Music vs. INTERSHOP Communications Aktiengesellschaft |
| HK Electric vs. EAGLE MATERIALS | HK Electric vs. BioNTech SE | HK Electric vs. SWISS WATER DECAFFCOFFEE | HK Electric vs. Kingdee International Software |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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