Correlation Between Tencent Music and TRAVEL +
Can any of the company-specific risk be diversified away by investing in both Tencent Music and TRAVEL + 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 TRAVEL + 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 TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Tencent Music and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and TRAVEL +.
Diversification Opportunities for Tencent Music and TRAVEL +
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and TRAVEL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Tencent Music i.e., Tencent Music and TRAVEL + go up and down completely randomly.
Pair Corralation between Tencent Music and TRAVEL +
Assuming the 90 days trading horizon Tencent Music is expected to generate 7.84 times less return on investment than TRAVEL +. In addition to that, Tencent Music is 1.29 times more volatile than TRAVEL LEISURE DL 01. It trades about 0.05 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.5 per unit of volatility. If you would invest 4,380 in TRAVEL LEISURE DL 01 on August 28, 2024 and sell it today you would earn a total of 870.00 from holding TRAVEL LEISURE DL 01 or generate 19.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. TRAVEL LEISURE DL 01
Performance |
| Timeline |
| Tencent Music Entert |
| TRAVEL LEISURE DL |
Tencent Music and TRAVEL + Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and TRAVEL +
The main advantage of trading using opposite Tencent Music and TRAVEL + positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, TRAVEL + 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 TRAVEL + will offset losses from the drop in TRAVEL +'s long position.| Tencent Music vs. Salesforce | Tencent Music vs. SANOK RUBBER ZY | Tencent Music vs. EAGLE MATERIALS | Tencent Music vs. CarsalesCom |
| TRAVEL + vs. Superior Plus Corp | TRAVEL + vs. NMI Holdings | TRAVEL + vs. Origin Agritech | TRAVEL + vs. SIVERS SEMICONDUCTORS AB |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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