Correlation Between Tencent Music and Sunny Optical
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Sunny Optical 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 Sunny Optical 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 Sunny Optical Technology, you can compare the effects of market volatilities on Tencent Music and Sunny Optical 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 Sunny Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Sunny Optical.
Diversification Opportunities for Tencent Music and Sunny Optical
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tencent and Sunny is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Tencent Music i.e., Tencent Music and Sunny Optical go up and down completely randomly.
Pair Corralation between Tencent Music and Sunny Optical
Assuming the 90 days trading horizon Tencent Music is expected to generate 2.32 times less return on investment than Sunny Optical. In addition to that, Tencent Music is 1.4 times more volatile than Sunny Optical Technology. It trades about 0.1 of its total potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.32 per unit of volatility. If you would invest 680.00 in Sunny Optical Technology on September 20, 2024 and sell it today you would earn a total of 130.00 from holding Sunny Optical Technology or generate 19.12% 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. Sunny Optical Technology
Performance |
| Timeline |
| Tencent Music Entert |
| Sunny Optical Technology |
Tencent Music and Sunny Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Sunny Optical
The main advantage of trading using opposite Tencent Music and Sunny Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Sunny Optical 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 Sunny Optical will offset losses from the drop in Sunny Optical'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 |
| Sunny Optical vs. KIMBALL ELECTRONICS | Sunny Optical vs. TT Electronics PLC | Sunny Optical vs. ARROW ELECTRONICS | Sunny Optical vs. ULTRA CLEAN HLDGS |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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