Correlation Between Tencent Music and Warner Music
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on Tencent Music and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Warner Music.
Diversification Opportunities for Tencent Music and Warner Music
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and Warner is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Tencent Music i.e., Tencent Music and Warner Music go up and down completely randomly.
Pair Corralation between Tencent Music and Warner Music
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 1.62 times more return on investment than Warner Music. However, Tencent Music is 1.62 times more volatile than Warner Music Group. It trades about 0.03 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.0 per unit of risk. If you would invest 910.00 in Tencent Music Entertainment on August 26, 2024 and sell it today you would earn a total of 243.00 from holding Tencent Music Entertainment or generate 26.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Warner Music Group
Performance |
| Timeline |
| Tencent Music Entert |
| Warner Music Group |
Tencent Music and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Warner Music
The main advantage of trading using opposite Tencent Music and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Warner Music vs. ADTRAN Inc | Warner Music vs. Belden Inc | Warner Music vs. ADC Therapeutics SA | Warner Music vs. Comtech Telecommunications 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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