Correlation Between Tencent Music and Autodesk

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

Diversification Opportunities for Tencent Music and Autodesk

-0.23

Correlation Coefficient

Tencent Music  Autodesk

Very good diversification

The 3 months correlation between Tencent and Autodesk is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Autodesk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autodesk 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 Autodesk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autodesk has no effect on the direction of Tencent Music i.e., Tencent Music and Autodesk go up and down completely randomly.

Pair Corralation between Tencent Music and Autodesk

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.59 times more return on investment than Autodesk. However, Tencent Music is 1.59 times more volatile than Autodesk. It trades about 0.04 of its potential returns per unit of risk. Autodesk is currently generating about 0.05 per unit of risk. If you would invest  762.00  in Tencent Music Entertainment on October 11, 2024 and sell it today you would earn a total of  278.00  from holding Tencent Music Entertainment or generate 36.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  Autodesk

Tencent Music Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tencent Music Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Autodesk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Autodesk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Autodesk may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tencent Music and Autodesk

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

The idea behind Tencent Music Entertainment and Autodesk 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 Global Correlations module to find global opportunities by holding instruments from different markets.