Correlation Between Tencent Music and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley Direct, you can compare the effects of market volatilities on Tencent Music and Morgan Stanley 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 Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Morgan Stanley.
Diversification Opportunities for Tencent Music and Morgan Stanley
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and Morgan is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Direct has no effect on the direction of Tencent Music i.e., Tencent Music and Morgan Stanley go up and down completely randomly.
Pair Corralation between Tencent Music and Morgan Stanley
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 1.91 times more return on investment than Morgan Stanley. However, Tencent Music is 1.91 times more volatile than Morgan Stanley Direct. It trades about 0.04 of its potential returns per unit of risk. Morgan Stanley Direct is currently generating about 0.04 per unit of risk. If you would invest 847.00 in Tencent Music Entertainment on October 31, 2024 and sell it today you would earn a total of 333.00 from holding Tencent Music Entertainment or generate 39.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 51.52% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Morgan Stanley Direct
Performance |
| Timeline |
| Tencent Music Entert |
| Morgan Stanley Direct |
Tencent Music and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Morgan Stanley
The main advantage of trading using opposite Tencent Music and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Morgan Stanley 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 Morgan Stanley will offset losses from the drop in Morgan Stanley's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Morgan Stanley vs. Sun Country Airlines | Morgan Stanley vs. SkyWest | Morgan Stanley vs. Volaris | Morgan Stanley vs. Griffon |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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