Correlation Between Stepan and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Stepan 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 Stepan and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Tencent Music Entertainment, you can compare the effects of market volatilities on Stepan 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 Stepan with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Tencent Music.
Diversification Opportunities for Stepan and Tencent Music
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Stepan and Tencent is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company 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 Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Tencent Music go up and down completely randomly.
Pair Corralation between Stepan and Tencent Music
Considering the 90-day investment horizon Stepan Company is expected to generate 0.93 times more return on investment than Tencent Music. However, Stepan Company is 1.08 times less risky than Tencent Music. It trades about 0.13 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 7,252 in Stepan Company on September 2, 2024 and sell it today you would earn a total of 438.00 from holding Stepan Company or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Tencent Music Entertainment
Performance |
| Timeline |
| Stepan Company |
| Tencent Music Entert |
Stepan and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Tencent Music
The main advantage of trading using opposite Stepan and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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.| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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