Correlation Between Tencent Music and Zoom Video
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Zoom Video 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 Zoom Video 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 Zoom Video Communications, you can compare the effects of market volatilities on Tencent Music and Zoom Video 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 Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Zoom Video.
Diversification Opportunities for Tencent Music and Zoom Video
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tencent and Zoom is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications 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 Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of Tencent Music i.e., Tencent Music and Zoom Video go up and down completely randomly.
Pair Corralation between Tencent Music and Zoom Video
Considering the 90-day investment horizon Tencent Music Entertainment is expected to under-perform the Zoom Video. In addition to that, Tencent Music is 1.55 times more volatile than Zoom Video Communications. It trades about -0.03 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.12 per unit of volatility. If you would invest 6,173 in Zoom Video Communications on September 1, 2024 and sell it today you would earn a total of 2,096 from holding Zoom Video Communications or generate 33.95% 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. Zoom Video Communications
Performance |
| Timeline |
| Tencent Music Entert |
| Zoom Video Communications |
Tencent Music and Zoom Video Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Zoom Video
The main advantage of trading using opposite Tencent Music and Zoom Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Zoom Video 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 Zoom Video will offset losses from the drop in Zoom Video's long position.| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
| Zoom Video vs. Ke Holdings | Zoom Video vs. nCino Inc | Zoom Video vs. Kingsoft Cloud Holdings | Zoom Video vs. Jfrog |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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