Correlation Between Tencent Music and CDN IMPERIAL

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

Diversification Opportunities for Tencent Music and CDN IMPERIAL

-0.3

Correlation Coefficient

Tencent Music  CDN IMPERIAL

Very good diversification

The 3 months correlation between Tencent and CDN is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK 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 CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of Tencent Music i.e., Tencent Music and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between Tencent Music and CDN IMPERIAL

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 2.72 times more return on investment than CDN IMPERIAL. However, Tencent Music is 2.72 times more volatile than CDN IMPERIAL BANK. It trades about 0.03 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about -0.15 per unit of risk. If you would invest  1,140  in Tencent Music Entertainment on December 20, 2024 and sell it today you would earn a total of  40.00  from holding Tencent Music Entertainment or generate 3.51% 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.  CDN IMPERIAL BANK

Tencent Music Entert

Risk-Adjusted Performance

Very 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 uncertain basic indicators, Tencent Music may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CDN IMPERIAL BANK

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDN IMPERIAL BANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tencent Music and CDN IMPERIAL

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

The idea behind Tencent Music Entertainment and CDN IMPERIAL BANK 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.