Correlation Between Tencent Music and Cheetah Mobile
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Cheetah Mobile 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 Cheetah Mobile 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 Cheetah Mobile, you can compare the effects of market volatilities on Tencent Music and Cheetah Mobile 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 Cheetah Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Cheetah Mobile.
Diversification Opportunities for Tencent Music and Cheetah Mobile
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tencent and Cheetah is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Cheetah Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheetah Mobile 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 Cheetah Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheetah Mobile has no effect on the direction of Tencent Music i.e., Tencent Music and Cheetah Mobile go up and down completely randomly.
Pair Corralation between Tencent Music and Cheetah Mobile
Considering the 90-day investment horizon Tencent Music Entertainment is expected to under-perform the Cheetah Mobile. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Music Entertainment is 1.55 times less risky than Cheetah Mobile. The stock trades about -0.04 of its potential returns per unit of risk. The Cheetah Mobile is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 446.00 in Cheetah Mobile on August 27, 2024 and sell it today you would earn a total of 9.00 from holding Cheetah Mobile or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Cheetah Mobile
Performance |
| Timeline |
| Tencent Music Entert |
| Cheetah Mobile |
Tencent Music and Cheetah Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Cheetah Mobile
The main advantage of trading using opposite Tencent Music and Cheetah Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Cheetah Mobile 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 Cheetah Mobile will offset losses from the drop in Cheetah Mobile's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Cheetah Mobile vs. Tuniu Corp | Cheetah Mobile vs. Yirendai | Cheetah Mobile vs. Xunlei Ltd Adr | Cheetah Mobile vs. Phoenix New Media |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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