Correlation Between Tencent Music and Global E

Can any of the company-specific risk be diversified away by investing in both Tencent Music and Global E 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 Global E 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 Global E Online, you can compare the effects of market volatilities on Tencent Music and Global E 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 Global E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Global E.

Diversification Opportunities for Tencent Music and Global E

-0.15

Correlation Coefficient

Tencent Music  Global E

Good diversification

The 3 months correlation between Tencent and Global is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online 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 Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of Tencent Music i.e., Tencent Music and Global E go up and down completely randomly.

Pair Corralation between Tencent Music and Global E

Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 0.96 times more return on investment than Global E. However, Tencent Music Entertainment is 1.04 times less risky than Global E. It trades about 0.05 of its potential returns per unit of risk. Global E Online is currently generating about 0.05 per unit of risk. 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

Tencent Music Entertainment  vs.  Global E Online

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.

Global E Online

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tencent Music and Global E

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

The idea behind Tencent Music Entertainment and Global E Online 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .