Correlation Between Tencent Music and Columbia Sportswear

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

Diversification Opportunities for Tencent Music and Columbia Sportswear

TencentColumbiaDiversified AwayTencentColumbiaDiversified Away100%
0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between Tencent and Columbia is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Tencent Music i.e., Tencent Music and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Tencent Music and Columbia Sportswear

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.48 times more return on investment than Columbia Sportswear. However, Tencent Music is 1.48 times more volatile than Columbia Sportswear. It trades about 0.13 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.02 per unit of risk. If you would invest  1,050  in Tencent Music Entertainment on November 19, 2024 and sell it today you would earn a total of  240.00  from holding Tencent Music Entertainment or generate 22.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Tencent Music Entertainment  vs.  Columbia Sportswear

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.1563TA CUW
       Timeline  
Tencent Music Entert 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Music reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1010.51111.51212.5
Columbia Sportswear 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Columbia Sportswear is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb767880828486

Tencent Music and Columbia Sportswear Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.89-6.66-4.43-2.20.02.254.626.999.3611.72 0.020.040.060.080.10
JavaScript chart by amCharts 3.21.1563TA CUW
       Returns  

Pair Trading with Tencent Music and Columbia Sportswear

The main advantage of trading using opposite Tencent Music and Columbia Sportswear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Columbia Sportswear 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 Columbia Sportswear will offset losses from the drop in Columbia Sportswear's long position.
The idea behind Tencent Music Entertainment and Columbia Sportswear 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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