Correlation Between Tencent Music and CeoTronics

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

Diversification Opportunities for Tencent Music and CeoTronics

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Tencent and CeoTronics is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of Tencent Music i.e., Tencent Music and CeoTronics go up and down completely randomly.

Pair Corralation between Tencent Music and CeoTronics

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to under-perform the CeoTronics. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Music Entertainment is 1.02 times less risky than CeoTronics. The stock trades about -0.03 of its potential returns per unit of risk. The CeoTronics AG is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  550.00  in CeoTronics AG on October 20, 2024 and sell it today you would earn a total of  65.00  from holding CeoTronics AG or generate 11.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Tencent Music Entertainment  vs.  CeoTronics AG

 Performance 
       Timeline  
Tencent Music Entert 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 nearly stable basic indicators, Tencent Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
CeoTronics AG 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tencent Music and CeoTronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tencent Music and CeoTronics

The main advantage of trading using opposite Tencent Music and CeoTronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, CeoTronics 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 CeoTronics will offset losses from the drop in CeoTronics' long position.
The idea behind Tencent Music Entertainment and CeoTronics AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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