Correlation Between Kuaishou Technology and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Kuaishou Technology 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 Kuaishou Technology and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kuaishou Technology and Tencent Music Entertainment, you can compare the effects of market volatilities on Kuaishou Technology 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 Kuaishou Technology with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuaishou Technology and Tencent Music.
Diversification Opportunities for Kuaishou Technology and Tencent Music
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kuaishou and Tencent is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kuaishou Technology 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 Kuaishou Technology 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 Kuaishou Technology 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 Kuaishou Technology i.e., Kuaishou Technology and Tencent Music go up and down completely randomly.
Pair Corralation between Kuaishou Technology and Tencent Music
Assuming the 90 days horizon Kuaishou Technology is expected to generate 2.34 times more return on investment than Tencent Music. However, Kuaishou Technology is 2.34 times more volatile than Tencent Music Entertainment. It trades about 0.03 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 137.00 in Kuaishou Technology on August 24, 2024 and sell it today you would lose (11.00) from holding Kuaishou Technology or give up 8.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Kuaishou Technology vs. Tencent Music Entertainment
Performance |
| Timeline |
| Kuaishou Technology |
| Tencent Music Entert |
Kuaishou Technology and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kuaishou Technology and Tencent Music
The main advantage of trading using opposite Kuaishou Technology and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuaishou Technology 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.| Kuaishou Technology vs. Tencent Holdings | Kuaishou Technology vs. Trivago NV | Kuaishou Technology vs. YY Inc Class | Kuaishou Technology vs. DouYu International Holdings |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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