Correlation Between Tencent Music and ZINC MEDIA

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

Diversification Opportunities for Tencent Music and ZINC MEDIA

0.65

Correlation Coefficient

Tencent Music  ZINC MEDIA

Poor diversification

The 3 months correlation between Tencent and ZINC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and ZINC MEDIA GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZINC MEDIA GR 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 ZINC MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZINC MEDIA GR has no effect on the direction of Tencent Music i.e., Tencent Music and ZINC MEDIA go up and down completely randomly.

Pair Corralation between Tencent Music and ZINC MEDIA

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.85 times more return on investment than ZINC MEDIA. However, Tencent Music is 1.85 times more volatile than ZINC MEDIA GR. It trades about 0.1 of its potential returns per unit of risk. ZINC MEDIA GR is currently generating about 0.16 per unit of risk. If you would invest  1,100  in Tencent Music Entertainment on December 28, 2024 and sell it today you would earn a total of  220.00  from holding Tencent Music Entertainment or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  ZINC MEDIA GR

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 7 (%) 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.

ZINC MEDIA GR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZINC MEDIA GR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ZINC MEDIA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tencent Music and ZINC MEDIA

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

The idea behind Tencent Music Entertainment and ZINC MEDIA GR 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.