Correlation Between Tencent Music and OPKO HEALTH

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

Diversification Opportunities for Tencent Music and OPKO HEALTH

-0.11

Correlation Coefficient

Tencent Music  OPKO HEALTH

Good diversification

The 3 months correlation between Tencent and OPKO is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and OPKO HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPKO HEALTH 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 OPKO HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPKO HEALTH has no effect on the direction of Tencent Music i.e., Tencent Music and OPKO HEALTH go up and down completely randomly.

Pair Corralation between Tencent Music and OPKO HEALTH

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 2.88 times more return on investment than OPKO HEALTH. However, Tencent Music is 2.88 times more volatile than OPKO HEALTH. It trades about 0.03 of its potential returns per unit of risk. OPKO HEALTH is currently generating about 0.06 per unit of risk. If you would invest  1,060  in Tencent Music Entertainment on October 9, 2024 and sell it today you would earn a total of  20.00  from holding Tencent Music Entertainment or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.37%
Values	Daily Returns

Tencent Music Entertainment  vs.  OPKO HEALTH

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.

OPKO HEALTH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OPKO HEALTH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, OPKO HEALTH is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tencent Music and OPKO HEALTH

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

The idea behind Tencent Music Entertainment and OPKO HEALTH 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.