Correlation Between Tencent Music and National Storage

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

Diversification Opportunities for Tencent Music and National Storage

TencentNationalDiversified AwayTencentNationalDiversified Away100%
-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Tencent and National is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of Tencent Music i.e., Tencent Music and National Storage go up and down completely randomly.

Pair Corralation between Tencent Music and National Storage

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 2.17 times more return on investment than National Storage. However, Tencent Music is 2.17 times more volatile than National Storage Affiliates. It trades about 0.15 of its potential returns per unit of risk. National Storage Affiliates is currently generating about -0.05 per unit of risk. If you would invest  840.00  in Tencent Music Entertainment on September 16, 2024 and sell it today you would earn a total of  300.00  from holding Tencent Music Entertainment or generate 35.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Tencent Music Entertainment  vs.  National Storage Affiliates

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -10010203040
JavaScript chart by amCharts 3.21.1563TA 4GC
       Timeline  
Tencent Music Entert 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tencent Music reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec99.51010.51111.51212.5
National Storage Aff 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Storage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec383940414243

Tencent Music and National Storage Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.03-8.26-5.49-2.72-0.04612.875.848.8211.7914.76 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.1563TA 4GC
       Returns  

Pair Trading with Tencent Music and National Storage

The main advantage of trading using opposite Tencent Music and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.
The idea behind Tencent Music Entertainment and National Storage Affiliates 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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