Correlation Between Tencent Music and Stepan
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Tencent Music and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Stepan.
Diversification Opportunities for Tencent Music and Stepan
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tencent and Stepan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Tencent Music i.e., Tencent Music and Stepan go up and down completely randomly.
Pair Corralation between Tencent Music and Stepan
Considering the 90-day investment horizon Tencent Music is expected to generate 1.98 times less return on investment than Stepan. In addition to that, Tencent Music is 1.08 times more volatile than Stepan Company. It trades about 0.06 of its total potential returns per unit of risk. Stepan Company is currently generating about 0.13 per unit of volatility. If you would invest 7,252 in Stepan Company on September 2, 2024 and sell it today you would earn a total of 438.00 from holding Stepan Company or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Stepan Company
Performance |
| Timeline |
| Tencent Music Entert |
| Stepan Company |
Tencent Music and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Stepan
The main advantage of trading using opposite Tencent Music and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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