Correlation Between Tencent Music and Carsales
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Carsales 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 Carsales 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 CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Tencent Music and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Carsales.
Diversification Opportunities for Tencent Music and Carsales
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tencent and Carsales is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Tencent Music i.e., Tencent Music and Carsales go up and down completely randomly.
Pair Corralation between Tencent Music and Carsales
Considering the 90-day investment horizon Tencent Music is expected to generate 1.52 times less return on investment than Carsales. In addition to that, Tencent Music is 1.35 times more volatile than CarsalesCom Ltd ADR. It trades about 0.04 of its total potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.08 per unit of volatility. If you would invest 2,803 in CarsalesCom Ltd ADR on August 30, 2024 and sell it today you would earn a total of 2,696 from holding CarsalesCom Ltd ADR or generate 96.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.91% |
| Values | Daily Returns |
Tencent Music Entertainment vs. CarsalesCom Ltd ADR
Performance |
| Timeline |
| Tencent Music Entert |
| CarsalesCom ADR |
Tencent Music and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Carsales
The main advantage of trading using opposite Tencent Music and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Carsales vs. Quizam Media | Carsales vs. DGTL Holdings | Carsales vs. Tinybeans Group Limited | Carsales vs. Sabio Holdings |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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