Correlation Between Lipocine and Tencent Music

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

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

Diversification Opportunities for Lipocine and Tencent Music

-0.31

Correlation Coefficient

Lipocine  Tencent Music

Very good diversification

The 3 months correlation between Lipocine and Tencent is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine 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 Lipocine 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 Lipocine 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 Lipocine i.e., Lipocine and Tencent Music go up and down completely randomly.

Pair Corralation between Lipocine and Tencent Music

Given the investment horizon of 90 days Lipocine is expected to generate 1.04 times less return on investment than Tencent Music. In addition to that, Lipocine is 1.22 times more volatile than Tencent Music Entertainment. It trades about 0.1 of its total potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.12 per unit of volatility. If you would invest  1,107  in Tencent Music Entertainment on September 27, 2024 and sell it today you would earn a total of  85.00  from holding Tencent Music Entertainment or generate 7.68% return on investment over 90 days.

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

Lipocine  vs.  Tencent Music Entertainment

Lipocine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lipocine displayed 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 rather sound primary indicators, Tencent Music is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lipocine and Tencent Music

The main advantage of trading using opposite Lipocine and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lipocine 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 Lipocine 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.