Correlation Between GAMING FAC and Tencent Music

Can any of the company-specific risk be diversified away by investing in both GAMING FAC and Tencent Music 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 GAMING FAC and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GAMING FAC SA and Tencent Music Entertainment, you can compare the effects of market volatilities on GAMING FAC and Tencent Music 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 GAMING FAC with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMING FAC and Tencent Music.

Diversification Opportunities for GAMING FAC and Tencent Music

-0.04

Correlation Coefficient

GAMING FAC  Tencent Music

Good diversification

The 3 months correlation between GAMING and Tencent is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and Tencent Music Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Music Entert and GAMING FAC 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 GAMING FAC SA are associated (or correlated) with Tencent Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Music Entert has no effect on the direction of GAMING FAC i.e., GAMING FAC and Tencent Music go up and down completely randomly.

Pair Corralation between GAMING FAC and Tencent Music

Assuming the 90 days horizon GAMING FAC SA is expected to under-perform the Tencent Music. But the stock apears to be less risky and, when comparing its historical volatility, GAMING FAC SA is 1.4 times less risky than Tencent Music. The stock trades about -0.1 of its potential returns per unit of risk. The Tencent Music Entertainment is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,150  in Tencent Music Entertainment on October 5, 2024 and sell it today you would lose (50.00) from holding Tencent Music Entertainment or give up 4.35% of portfolio value over 90 days.

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

GAMING FAC SA  vs.  Tencent Music Entertainment

GAMING FAC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMING FAC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GAMING FAC and Tencent Music

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

The idea behind GAMING FAC SA and Tencent Music Entertainment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.