Correlation Between Tencent Music and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on Tencent Music and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Electronic Arts.
Diversification Opportunities for Tencent Music and Electronic Arts
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and Electronic is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Tencent Music i.e., Tencent Music and Electronic Arts go up and down completely randomly.
Pair Corralation between Tencent Music and Electronic Arts
Considering the 90-day investment horizon Tencent Music is expected to generate 3.07 times less return on investment than Electronic Arts. In addition to that, Tencent Music is 2.78 times more volatile than Electronic Arts. It trades about 0.01 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.13 per unit of volatility. If you would invest 12,950 in Electronic Arts on September 3, 2024 and sell it today you would earn a total of 3,417 from holding Electronic Arts or generate 26.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Electronic Arts
Performance |
| Timeline |
| Tencent Music Entert |
| Electronic Arts |
Tencent Music and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Electronic Arts
The main advantage of trading using opposite Tencent Music and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Electronic Arts vs. Nintendo Co ADR | Electronic Arts vs. Roblox Corp | Electronic Arts vs. NetEase | Electronic Arts vs. Take Two Interactive Software |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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