Correlation Between Tencent Music and SANOK RUBBER

Can any of the company-specific risk be diversified away by investing in both Tencent Music and SANOK RUBBER 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 SANOK RUBBER 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 SANOK RUBBER ZY, you can compare the effects of market volatilities on Tencent Music and SANOK RUBBER 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 SANOK RUBBER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and SANOK RUBBER.

Diversification Opportunities for Tencent Music and SANOK RUBBER

0.18

Correlation Coefficient

Tencent Music  SANOK RUBBER

Average diversification

The 3 months correlation between Tencent and SANOK is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and SANOK RUBBER ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANOK RUBBER ZY 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 SANOK RUBBER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANOK RUBBER ZY has no effect on the direction of Tencent Music i.e., Tencent Music and SANOK RUBBER go up and down completely randomly.

Pair Corralation between Tencent Music and SANOK RUBBER

Assuming the 90 days trading horizon Tencent Music is expected to generate 1.89 times less return on investment than SANOK RUBBER. In addition to that, Tencent Music is 1.14 times more volatile than SANOK RUBBER ZY. It trades about 0.04 of its total potential returns per unit of risk. SANOK RUBBER ZY is currently generating about 0.09 per unit of volatility. If you would invest  180.00  in SANOK RUBBER ZY on September 29, 2024 and sell it today you would earn a total of  296.00  from holding SANOK RUBBER ZY or generate 164.44% 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.  SANOK RUBBER ZY

Tencent Music Entert

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SANOK RUBBER ZY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SANOK RUBBER ZY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SANOK RUBBER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tencent Music and SANOK RUBBER

The main advantage of trading using opposite Tencent Music and SANOK RUBBER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, SANOK RUBBER 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 SANOK RUBBER will offset losses from the drop in SANOK RUBBER's long position.

The idea behind Tencent Music Entertainment and SANOK RUBBER ZY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.