Correlation Between Tencent Music and Kering SA

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

Diversification Opportunities for Tencent Music and Kering SA

0.0

Correlation Coefficient

Tencent Music  Kering SA

Pay attention - limited upside

The 3 months correlation between Tencent and Kering is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA 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 Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Tencent Music i.e., Tencent Music and Kering SA go up and down completely randomly.

Pair Corralation between Tencent Music and Kering SA

If you would invest  1,120  in Tencent Music Entertainment on December 22, 2024 and sell it today you would earn a total of  170.00  from holding Tencent Music Entertainment or generate 15.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  Kering SA

Tencent Music Entert

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tencent Music reported solid returns over the last few months and may actually be approaching a breakup point.

Kering SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kering SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tencent Music and Kering SA

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

The idea behind Tencent Music Entertainment and Kering SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.