Correlation Between Prosus and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Prosus 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 Prosus and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus and Tencent Music Entertainment, you can compare the effects of market volatilities on Prosus 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 Prosus with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus and Tencent Music.
Diversification Opportunities for Prosus and Tencent Music
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prosus and Tencent is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prosus 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 Prosus 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 Prosus 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 Prosus i.e., Prosus and Tencent Music go up and down completely randomly.
Pair Corralation between Prosus and Tencent Music
Assuming the 90 days horizon Prosus is expected to under-perform the Tencent Music. But the pink sheet apears to be less risky and, when comparing its historical volatility, Prosus is 1.72 times less risky than Tencent Music. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Tencent Music Entertainment is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 1,184 in Tencent Music Entertainment on August 28, 2024 and sell it today you would lose (65.00) from holding Tencent Music Entertainment or give up 5.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosus vs. Tencent Music Entertainment
Performance |
| Timeline |
| Prosus |
| Tencent Music Entert |
Prosus and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus and Tencent Music
The main advantage of trading using opposite Prosus and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus 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.| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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