Correlation Between Tencent Music and Tesla
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on Tencent Music and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Tesla.
Diversification Opportunities for Tencent Music and Tesla
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tencent and Tesla is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Tencent Music i.e., Tencent Music and Tesla go up and down completely randomly.
Pair Corralation between Tencent Music and Tesla
Considering the 90-day investment horizon Tencent Music is expected to generate 10.49 times less return on investment than Tesla. But when comparing it to its historical volatility, Tencent Music Entertainment is 1.32 times less risky than Tesla. It trades about 0.01 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 17,298 in Tesla Inc on September 3, 2024 and sell it today you would earn a total of 17,218 from holding Tesla Inc or generate 99.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Tesla Inc
Performance |
| Timeline |
| Tencent Music Entert |
| Tesla Inc |
Tencent Music and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Tesla
The main advantage of trading using opposite Tencent Music and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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