Correlation Between Silicon Motion and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Silicon Motion 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 Silicon Motion and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicon Motion Technology and Tencent Music Entertainment, you can compare the effects of market volatilities on Silicon Motion 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 Silicon Motion with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Tencent Music.
Diversification Opportunities for Silicon Motion and Tencent Music
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Silicon and Tencent is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion 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 Silicon Motion 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 Silicon Motion 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 Silicon Motion i.e., Silicon Motion and Tencent Music go up and down completely randomly.
Pair Corralation between Silicon Motion and Tencent Music
Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the Tencent Music. In addition to that, Silicon Motion is 1.73 times more volatile than Tencent Music Entertainment. It trades about -0.18 of its total potential returns per unit of risk. Tencent Music Entertainment is currently generating about -0.2 per unit of volatility. If you would invest 1,070 in Tencent Music Entertainment on October 16, 2024 and sell it today you would lose (70.00) from holding Tencent Music Entertainment or give up 6.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Motion Technology vs. Tencent Music Entertainment
Performance |
| Timeline |
| Silicon Motion Technology |
| Tencent Music Entert |
Silicon Motion and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Tencent Music
The main advantage of trading using opposite Silicon Motion and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion 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.| Silicon Motion vs. USU Software AG | Silicon Motion vs. Sekisui Chemical Co | Silicon Motion vs. INDO RAMA SYNTHETIC | Silicon Motion vs. PTT Global Chemical |
| Tencent Music vs. Silicon Motion Technology | Tencent Music vs. TRI CHEMICAL LABORATINC | Tencent Music vs. Carnegie Clean Energy | Tencent Music vs. CHEMICAL INDUSTRIES |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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