Correlation Between Bill and Tencent Music

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

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

Diversification Opportunities for Bill and Tencent Music

-0.35

Correlation Coefficient

Bill  Tencent Music

Very good diversification

The 3 months correlation between Bill and Tencent is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings 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 Bill 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 Bill Com Holdings 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 Bill i.e., Bill and Tencent Music go up and down completely randomly.

Pair Corralation between Bill and Tencent Music

Given the investment horizon of 90 days Bill Com Holdings is expected to under-perform the Tencent Music. In addition to that, Bill is 1.09 times more volatile than Tencent Music Entertainment. It trades about -0.01 of its total potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.05 per unit of volatility. If you would invest  771.00  in Tencent Music Entertainment on October 3, 2024 and sell it today you would earn a total of  364.00  from holding Tencent Music Entertainment or generate 47.21% return on investment over 90 days.

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

Bill Com Holdings  vs.  Tencent Music Entertainment

Bill Com Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bill and Tencent Music

The main advantage of trading using opposite Bill and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bill 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 Bill Com Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.