Correlation Between Apple and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Tencent Music Entertainment, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Tencent Music.
Diversification Opportunities for Apple and Tencent Music
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Apple and Tencent is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and Tencent Music go up and down completely randomly.
Pair Corralation between Apple and Tencent Music
Assuming the 90 days trading horizon Apple is expected to generate 1.82 times less return on investment than Tencent Music. But when comparing it to its historical volatility, Apple Inc is 2.15 times less risky than Tencent Music. It trades about 0.09 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 940.00 in Tencent Music Entertainment on August 29, 2024 and sell it today you would earn a total of 120.00 from holding Tencent Music Entertainment or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Apple Inc vs. Tencent Music Entertainment
Performance |
| Timeline |
| Apple Inc |
| Tencent Music Entert |
Apple and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Tencent Music
The main advantage of trading using opposite Apple and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Cellnex Telecom SA | Apple vs. Spirent Communications plc | Apple vs. Ribbon Communications | Apple vs. Perseus Mining Limited |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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