Correlation Between Tencent Music and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Safety Insurance 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 Safety Insurance 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 Safety Insurance Group, you can compare the effects of market volatilities on Tencent Music and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Safety Insurance.
Diversification Opportunities for Tencent Music and Safety Insurance
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and Safety is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Tencent Music i.e., Tencent Music and Safety Insurance go up and down completely randomly.
Pair Corralation between Tencent Music and Safety Insurance
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 2.28 times more return on investment than Safety Insurance. However, Tencent Music is 2.28 times more volatile than Safety Insurance Group. It trades about 0.09 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.05 per unit of risk. If you would invest 920.00 in Tencent Music Entertainment on August 31, 2024 and sell it today you would earn a total of 150.00 from holding Tencent Music Entertainment or generate 16.3% 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. Safety Insurance Group
Performance |
| Timeline |
| Tencent Music Entert |
| Safety Insurance |
Tencent Music and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Safety Insurance
The main advantage of trading using opposite Tencent Music and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| Tencent Music vs. Entravision Communications | Tencent Music vs. DOCDATA | Tencent Music vs. MICRONIC MYDATA | Tencent Music vs. Ribbon Communications |
| Safety Insurance vs. Chuangs China Investments | Safety Insurance vs. UNIVERSAL MUSIC GROUP | Safety Insurance vs. Gladstone Investment | Safety Insurance vs. BURLINGTON STORES |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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