Correlation Between Tencent Music and Auddia

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

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

Diversification Opportunities for Tencent Music and Auddia

-0.12

Correlation Coefficient

Tencent Music  Auddia

Good diversification

The 3 months correlation between Tencent and Auddia is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Auddia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auddia Inc and Tencent Music 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 Tencent Music Entertainment are associated (or correlated) with Auddia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auddia Inc has no effect on the direction of Tencent Music i.e., Tencent Music and Auddia go up and down completely randomly.

Pair Corralation between Tencent Music and Auddia

Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 0.16 times more return on investment than Auddia. However, Tencent Music Entertainment is 6.32 times less risky than Auddia. It trades about 0.02 of its potential returns per unit of risk. Auddia Inc is currently generating about -0.01 per unit of risk. If you would invest  1,185  in Tencent Music Entertainment on September 24, 2024 and sell it today you would earn a total of  10.00  from holding Tencent Music Entertainment or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.77%
Values	Daily Returns

Tencent Music Entertainment  vs.  Auddia Inc

Tencent Music Entert

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Tencent Music is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Auddia Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auddia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tencent Music and Auddia

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

The idea behind Tencent Music Entertainment and Auddia Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.