Correlation Between Infosys and Tencent Music

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

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

Diversification Opportunities for Infosys and Tencent Music

0.4

Correlation Coefficient

Infosys  Tencent Music

Very weak diversification

The 3 months correlation between Infosys and Tencent is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Limited 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 Infosys 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 Infosys Limited 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 Infosys i.e., Infosys and Tencent Music go up and down completely randomly.

Pair Corralation between Infosys and Tencent Music

Assuming the 90 days horizon Infosys Limited is expected to generate 1.0 times more return on investment than Tencent Music. However, Infosys Limited is 1.0 times less risky than Tencent Music. It trades about 0.01 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.01 per unit of risk. If you would invest  2,015  in Infosys Limited on October 23, 2024 and sell it today you would lose (15.00) from holding Infosys Limited or give up 0.74% of portfolio value over 90 days.

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

Infosys Limited  vs.  Tencent Music Entertainment

Infosys Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infosys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Infosys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 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.

Pair Trading with Infosys and Tencent Music

The main advantage of trading using opposite Infosys and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys 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 Infosys Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.