Correlation Between Tencent Music and Prosus
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Prosus 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 Prosus 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 Prosus, you can compare the effects of market volatilities on Tencent Music and Prosus 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 Prosus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Prosus.
Diversification Opportunities for Tencent Music and Prosus
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tencent and Prosus is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus 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 Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of Tencent Music i.e., Tencent Music and Prosus go up and down completely randomly.
Pair Corralation between Tencent Music and Prosus
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 0.55 times more return on investment than Prosus. However, Tencent Music Entertainment is 1.83 times less risky than Prosus. It trades about -0.17 of its potential returns per unit of risk. Prosus is currently generating about -0.16 per unit of risk. If you would invest 1,189 in Tencent Music Entertainment on October 25, 2024 and sell it today you would lose (74.00) from holding Tencent Music Entertainment or give up 6.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Prosus
Performance |
| Timeline |
| Tencent Music Entert |
| Prosus |
Tencent Music and Prosus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Prosus
The main advantage of trading using opposite Tencent Music and Prosus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Prosus 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 Prosus will offset losses from the drop in Prosus' long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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