Correlation Between Tencent Music and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Tencent Music and SMA Solar 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 SMA Solar 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 SMA Solar Technology, you can compare the effects of market volatilities on Tencent Music and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and SMA Solar.
Diversification Opportunities for Tencent Music and SMA Solar
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and SMA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Tencent Music i.e., Tencent Music and SMA Solar go up and down completely randomly.
Pair Corralation between Tencent Music and SMA Solar
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 0.68 times more return on investment than SMA Solar. However, Tencent Music Entertainment is 1.48 times less risky than SMA Solar. It trades about 0.04 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.01 per unit of risk. If you would invest 1,080 in Tencent Music Entertainment on September 20, 2024 and sell it today you would earn a total of 40.00 from holding Tencent Music Entertainment or generate 3.7% 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. SMA Solar Technology
Performance |
| Timeline |
| Tencent Music Entert |
| SMA Solar Technology |
Tencent Music and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and SMA Solar
The main advantage of trading using opposite Tencent Music and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| Tencent Music vs. ADRIATIC METALS LS 013355 | Tencent Music vs. Tower Semiconductor | Tencent Music vs. Pembina Pipeline Corp | Tencent Music vs. BORR DRILLING NEW |
| SMA Solar vs. DFS Furniture PLC | SMA Solar vs. Corporate Office Properties | SMA Solar vs. Caseys General Stores | SMA Solar vs. Vastned Retail NV |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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