Correlation Between Tencent Music and ADHI KARYA

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

Diversification Opportunities for Tencent Music and ADHI KARYA

-0.19

Correlation Coefficient

Tencent Music  ADHI KARYA

Good diversification

The 3 months correlation between Tencent and ADHI is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and ADHI KARYA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADHI KARYA 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 ADHI KARYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADHI KARYA has no effect on the direction of Tencent Music i.e., Tencent Music and ADHI KARYA go up and down completely randomly.

Pair Corralation between Tencent Music and ADHI KARYA

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to under-perform the ADHI KARYA. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Music Entertainment is 2.01 times less risky than ADHI KARYA. The stock trades about -0.3 of its potential returns per unit of risk. The ADHI KARYA is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1.10  in ADHI KARYA on October 9, 2024 and sell it today you would lose (0.15) from holding ADHI KARYA or give up 13.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

Tencent Music Entertainment  vs.  ADHI KARYA

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 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.

ADHI KARYA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADHI KARYA 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 basic indicators remain comparatively stable which may send shares a bit higher in February 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 ADHI KARYA

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

The idea behind Tencent Music Entertainment and ADHI KARYA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.