Correlation Between Tencent Music and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on Tencent Music and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Guangdong Investment.
Diversification Opportunities for Tencent Music and Guangdong Investment
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tencent and Guangdong is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Tencent Music i.e., Tencent Music and Guangdong Investment go up and down completely randomly.
Pair Corralation between Tencent Music and Guangdong Investment
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 1.45 times more return on investment than Guangdong Investment. However, Tencent Music is 1.45 times more volatile than Guangdong Investment Limited. It trades about 0.03 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.11 per unit of risk. If you would invest 1,142 in Tencent Music Entertainment on August 31, 2024 and sell it today you would earn a total of 9.00 from holding Tencent Music Entertainment or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Guangdong Investment Limited
Performance |
| Timeline |
| Tencent Music Entert |
| Guangdong Investment |
Tencent Music and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Guangdong Investment
The main advantage of trading using opposite Tencent Music and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Endesa SA ADR | Guangdong Investment vs. HUMANA INC |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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