Correlation Between Tencent Music and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Auto Trader 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 Tencent Music and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Music Entertainment and Auto Trader Group, you can compare the effects of market volatilities on Tencent Music and Auto Trader 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 Tencent Music with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Auto Trader.
Diversification Opportunities for Tencent Music and Auto Trader
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tencent and Auto is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Tencent Music 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 Tencent Music Entertainment are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Tencent Music i.e., Tencent Music and Auto Trader go up and down completely randomly.
Pair Corralation between Tencent Music and Auto Trader
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 1.18 times more return on investment than Auto Trader. However, Tencent Music is 1.18 times more volatile than Auto Trader Group. It trades about 0.0 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.17 per unit of risk. If you would invest 1,156 in Tencent Music Entertainment on August 30, 2024 and sell it today you would lose (5.00) from holding Tencent Music Entertainment or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Auto Trader Group
Performance |
| Timeline |
| Tencent Music Entert |
| Auto Trader Group |
Tencent Music and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Auto Trader
The main advantage of trading using opposite Tencent Music and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Auto Trader vs. Tinybeans Group Limited | Auto Trader vs. DGTL Holdings | Auto Trader vs. Sabio Holdings | Auto Trader vs. Zoomd Technologies |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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