Correlation Between Tencent Music and Monster Beverage

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Monster Beverage 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 Monster Beverage 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 Monster Beverage Corp, you can compare the effects of market volatilities on Tencent Music and Monster Beverage 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 Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Monster Beverage.

Diversification Opportunities for Tencent Music and Monster Beverage

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Tencent and Monster is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp 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 Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Tencent Music i.e., Tencent Music and Monster Beverage go up and down completely randomly.

Pair Corralation between Tencent Music and Monster Beverage

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 3.64 times more return on investment than Monster Beverage. However, Tencent Music is 3.64 times more volatile than Monster Beverage Corp. It trades about 0.08 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.25 per unit of risk. If you would invest  1,070  in Tencent Music Entertainment on September 28, 2024 and sell it today you would earn a total of  50.00  from holding Tencent Music Entertainment or generate 4.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Tencent Music Entertainment  vs.  Monster Beverage Corp

 Performance 
       Timeline  
Tencent Music Entert 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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 January 2025.
Monster Beverage Corp 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tencent Music and Monster Beverage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tencent Music and Monster Beverage

The main advantage of trading using opposite Tencent Music and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Monster Beverage 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 Monster Beverage will offset losses from the drop in Monster Beverage's long position.
The idea behind Tencent Music Entertainment and Monster Beverage Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.

Other Complementary Tools

Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings