Correlation Between Aluminumof China and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Tencent Music 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 Aluminumof China and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Tencent Music Entertainment, you can compare the effects of market volatilities on Aluminumof China and Tencent Music 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 Aluminumof China with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Tencent Music.
Diversification Opportunities for Aluminumof China and Tencent Music
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aluminumof and Tencent is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Tencent Music Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Music Entert and Aluminumof China 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 Aluminum of are associated (or correlated) with Tencent Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Music Entert has no effect on the direction of Aluminumof China i.e., Aluminumof China and Tencent Music go up and down completely randomly.
Pair Corralation between Aluminumof China and Tencent Music
Assuming the 90 days horizon Aluminum of is expected to generate 1.03 times more return on investment than Tencent Music. However, Aluminumof China is 1.03 times more volatile than Tencent Music Entertainment. It trades about 0.07 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.06 per unit of risk. If you would invest 32.00 in Aluminum of on September 28, 2024 and sell it today you would earn a total of 21.00 from holding Aluminum of or generate 65.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Tencent Music Entertainment
Performance |
| Timeline |
| Aluminumof China |
| Tencent Music Entert |
Aluminumof China and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Tencent Music
The main advantage of trading using opposite Aluminumof China and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Tencent Music 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 Tencent Music will offset losses from the drop in Tencent Music's long position.| Aluminumof China vs. Norsk Hydro ASA | Aluminumof China vs. Norsk Hydro ASA | Aluminumof China vs. AMAG Austria Metall | Aluminumof China vs. Kaiser Aluminum |
| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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