Correlation Between Tencent Music and BuzzFeed
Can any of the company-specific risk be diversified away by investing in both Tencent Music and BuzzFeed 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 BuzzFeed 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 BuzzFeed, you can compare the effects of market volatilities on Tencent Music and BuzzFeed 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 BuzzFeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and BuzzFeed.
Diversification Opportunities for Tencent Music and BuzzFeed
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and BuzzFeed is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and BuzzFeed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BuzzFeed 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 BuzzFeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BuzzFeed has no effect on the direction of Tencent Music i.e., Tencent Music and BuzzFeed go up and down completely randomly.
Pair Corralation between Tencent Music and BuzzFeed
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 0.45 times more return on investment than BuzzFeed. However, Tencent Music Entertainment is 2.24 times less risky than BuzzFeed. It trades about -0.17 of its potential returns per unit of risk. BuzzFeed is currently generating about -0.09 per unit of risk. If you would invest 1,189 in Tencent Music Entertainment on October 25, 2024 and sell it today you would lose (74.00) from holding Tencent Music Entertainment or give up 6.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. BuzzFeed
Performance |
| Timeline |
| Tencent Music Entert |
| BuzzFeed |
Tencent Music and BuzzFeed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and BuzzFeed
The main advantage of trading using opposite Tencent Music and BuzzFeed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, BuzzFeed 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 BuzzFeed will offset losses from the drop in BuzzFeed's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| BuzzFeed vs. MediaAlpha | BuzzFeed vs. Asset Entities Class | BuzzFeed vs. Yelp Inc | BuzzFeed vs. Shutterstock |
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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