Correlation Between Baidu and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Baidu 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 Baidu and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Tencent Music Entertainment, you can compare the effects of market volatilities on Baidu 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 Baidu with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Tencent Music.
Diversification Opportunities for Baidu and Tencent Music
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baidu and Tencent is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Baidu 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 Baidu 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 Baidu 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 Baidu i.e., Baidu and Tencent Music go up and down completely randomly.
Pair Corralation between Baidu and Tencent Music
Given the investment horizon of 90 days Baidu Inc is expected to under-perform the Tencent Music. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 1.13 times less risky than Tencent Music. The stock trades about -0.01 of its potential returns per unit of risk. The Tencent Music Entertainment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 755.00 in Tencent Music Entertainment on August 27, 2024 and sell it today you would earn a total of 398.00 from holding Tencent Music Entertainment or generate 52.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Tencent Music Entertainment
Performance |
| Timeline |
| Baidu Inc |
| Tencent Music Entert |
Baidu and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Tencent Music
The main advantage of trading using opposite Baidu and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu 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.| Baidu vs. Tencent Music Entertainment | Baidu vs. Twilio Inc | Baidu vs. Spotify Technology SA | Baidu vs. Weibo Corp |
| Tencent Music vs. Trivago NV | Tencent Music vs. Cheetah Mobile | Tencent Music vs. Comscore | Tencent Music vs. Arena Group Holdings |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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