Correlation Between Tencent Music and PT Indofood
Can any of the company-specific risk be diversified away by investing in both Tencent Music and PT Indofood 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 PT Indofood 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 PT Indofood Sukses, you can compare the effects of market volatilities on Tencent Music and PT Indofood 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 PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and PT Indofood.
Diversification Opportunities for Tencent Music and PT Indofood
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tencent and ISM is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses 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 PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Tencent Music i.e., Tencent Music and PT Indofood go up and down completely randomly.
Pair Corralation between Tencent Music and PT Indofood
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 0.79 times more return on investment than PT Indofood. However, Tencent Music Entertainment is 1.27 times less risky than PT Indofood. It trades about 0.08 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.03 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. PT Indofood Sukses
Performance |
| Timeline |
| Tencent Music Entert |
| PT Indofood Sukses |
Tencent Music and PT Indofood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and PT Indofood
The main advantage of trading using opposite Tencent Music and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, PT Indofood 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 PT Indofood will offset losses from the drop in PT Indofood's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| PT Indofood vs. AUSTEVOLL SEAFOOD | PT Indofood vs. Direct Line Insurance | PT Indofood vs. QBE Insurance Group | PT Indofood vs. ZURICH INSURANCE GROUP |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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