Correlation Between CeoTronics and Tencent Music

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

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

Diversification Opportunities for CeoTronics and Tencent Music

0.43

Correlation Coefficient

CeoTronics  Tencent Music

Very weak diversification

The 3 months correlation between CeoTronics and Tencent is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CeoTronics AG 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 CeoTronics 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 CeoTronics AG 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 CeoTronics i.e., CeoTronics and Tencent Music go up and down completely randomly.

Pair Corralation between CeoTronics and Tencent Music

Assuming the 90 days trading horizon CeoTronics AG is expected to generate 0.99 times more return on investment than Tencent Music. However, CeoTronics AG is 1.01 times less risky than Tencent Music. It trades about 0.03 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about -0.04 per unit of risk. If you would invest  555.00  in CeoTronics AG on October 5, 2024 and sell it today you would earn a total of  20.00  from holding CeoTronics AG or generate 3.6% return on investment over 90 days.

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

CeoTronics AG  vs.  Tencent Music Entertainment

CeoTronics AG

Risk-Adjusted Performance

0 of 100

Weak

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

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 CeoTronics and Tencent Music

The main advantage of trading using opposite CeoTronics and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CeoTronics 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 CeoTronics AG 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.