Correlation Between Tencent Music and Publicis Groupe
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Publicis Groupe 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 Publicis Groupe 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 Publicis Groupe SA, you can compare the effects of market volatilities on Tencent Music and Publicis Groupe 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 Publicis Groupe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Publicis Groupe.
Diversification Opportunities for Tencent Music and Publicis Groupe
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tencent and Publicis is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Publicis Groupe SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Publicis Groupe SA 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 Publicis Groupe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Publicis Groupe SA has no effect on the direction of Tencent Music i.e., Tencent Music and Publicis Groupe go up and down completely randomly.
Pair Corralation between Tencent Music and Publicis Groupe
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 2.99 times more return on investment than Publicis Groupe. However, Tencent Music is 2.99 times more volatile than Publicis Groupe SA. It trades about 0.11 of its potential returns per unit of risk. Publicis Groupe SA is currently generating about 0.03 per unit of risk. If you would invest 1,120 in Tencent Music Entertainment on November 29, 2024 and sell it today you would earn a total of 110.00 from holding Tencent Music Entertainment or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Publicis Groupe SA
Performance |
| Timeline |
| Tencent Music Entert |
| Publicis Groupe SA |
Tencent Music and Publicis Groupe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Publicis Groupe
The main advantage of trading using opposite Tencent Music and Publicis Groupe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Publicis Groupe 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 Publicis Groupe will offset losses from the drop in Publicis Groupe's long position.| Tencent Music vs. Harmony Gold Mining | Tencent Music vs. Perseus Mining Limited | Tencent Music vs. PENN NATL GAMING | Tencent Music vs. UNIVERSAL MUSIC GROUP |
| Publicis Groupe vs. ANGLO ASIAN MINING | Publicis Groupe vs. CanSino Biologics | Publicis Groupe vs. MAG Silver Corp | Publicis Groupe vs. SHELF DRILLING LTD |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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