Correlation Between Tencent Music and Churchill Downs

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

Diversification Opportunities for Tencent Music and Churchill Downs

-0.23

Correlation Coefficient

Tencent Music  Churchill Downs

Very good diversification

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

Pair Corralation between Tencent Music and Churchill Downs

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to under-perform the Churchill Downs. In addition to that, Tencent Music is 2.46 times more volatile than Churchill Downs Incorporated. It trades about -0.34 of its total potential returns per unit of risk. Churchill Downs Incorporated is currently generating about -0.19 per unit of volatility. If you would invest  13,100  in Churchill Downs Incorporated on October 10, 2024 and sell it today you would lose (500.00) from holding Churchill Downs Incorporated or give up 3.82% of portfolio value over 90 days.

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

Tencent Music Entertainment  vs.  Churchill Downs Incorporated

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.

Churchill Downs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Churchill Downs Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Churchill Downs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tencent Music and Churchill Downs

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

The idea behind Tencent Music Entertainment and Churchill Downs Incorporated 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.