Correlation Between Tencent Music and X-FAB Silicon
Can any of the company-specific risk be diversified away by investing in both Tencent Music and X-FAB Silicon 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 X-FAB Silicon 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on Tencent Music and X-FAB Silicon 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 X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and X-FAB Silicon.
Diversification Opportunities for Tencent Music and X-FAB Silicon
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and X-FAB is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Tencent Music i.e., Tencent Music and X-FAB Silicon go up and down completely randomly.
Pair Corralation between Tencent Music and X-FAB Silicon
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to under-perform the X-FAB Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Music Entertainment is 1.16 times less risky than X-FAB Silicon. The stock trades about -0.23 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 495.00 in X FAB Silicon Foundries on October 14, 2024 and sell it today you would earn a total of 17.00 from holding X FAB Silicon Foundries or generate 3.43% 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. X FAB Silicon Foundries
Performance |
| Timeline |
| Tencent Music Entert |
| X FAB Silicon |
Tencent Music and X-FAB Silicon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and X-FAB Silicon
The main advantage of trading using opposite Tencent Music and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, X-FAB Silicon 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 X-FAB Silicon will offset losses from the drop in X-FAB Silicon's long position.| Tencent Music vs. BJs Restaurants | Tencent Music vs. COSTCO WHOLESALE CDR | Tencent Music vs. MCEWEN MINING INC | Tencent Music vs. Harmony Gold Mining |
| X-FAB Silicon vs. AIR PRODCHEMICALS | X-FAB Silicon vs. Liberty Broadband | X-FAB Silicon vs. Tencent Music Entertainment | X-FAB Silicon vs. China Eastern Airlines |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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