Correlation Between Fevertree Drinks and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks 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 Fevertree Drinks and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fevertree Drinks Plc and Tencent Music Entertainment, you can compare the effects of market volatilities on Fevertree Drinks 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 Fevertree Drinks with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Tencent Music.
Diversification Opportunities for Fevertree Drinks and Tencent Music
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fevertree and Tencent is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc 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 Fevertree Drinks 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 Fevertree Drinks Plc 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 Fevertree Drinks i.e., Fevertree Drinks and Tencent Music go up and down completely randomly.
Pair Corralation between Fevertree Drinks and Tencent Music
Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the Tencent Music. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 2.41 times less risky than Tencent Music. The pink sheet trades about -0.31 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 1,126 in Tencent Music Entertainment on September 3, 2024 and sell it today you would earn a total of 15.00 from holding Tencent Music Entertainment or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fevertree Drinks Plc vs. Tencent Music Entertainment
Performance |
| Timeline |
| Fevertree Drinks Plc |
| Tencent Music Entert |
Fevertree Drinks and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and Tencent Music
The main advantage of trading using opposite Fevertree Drinks and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks 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.| Fevertree Drinks vs. National Beverage Corp | Fevertree Drinks vs. Celsius Holdings | Fevertree Drinks vs. Monster Beverage Corp | Fevertree Drinks vs. Coca Cola Femsa SAB |
| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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