Correlation Between Tencent Music and Boeing

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

Diversification Opportunities for Tencent Music and Boeing

0.23

Correlation Coefficient

Tencent Music  Boeing

Modest diversification

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

Pair Corralation between Tencent Music and Boeing

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.67 times more return on investment than Boeing. However, Tencent Music is 1.67 times more volatile than The Boeing. It trades about 0.04 of its potential returns per unit of risk. The Boeing is currently generating about 0.0 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  The Boeing

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.

Boeing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tencent Music and Boeing

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

The idea behind Tencent Music Entertainment and The Boeing 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.