Correlation Between Tencent Music and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Coca Cola 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 Coca Cola 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 The Coca Cola, you can compare the effects of market volatilities on Tencent Music and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Coca Cola.
Diversification Opportunities for Tencent Music and Coca Cola
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tencent and Coca is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Tencent Music i.e., Tencent Music and Coca Cola go up and down completely randomly.
Pair Corralation between Tencent Music and Coca Cola
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 4.22 times more return on investment than Coca Cola. However, Tencent Music is 4.22 times more volatile than The Coca Cola. It trades about 0.12 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.22 per unit of risk. If you would invest 948.00 in Tencent Music Entertainment on September 15, 2024 and sell it today you would earn a total of 250.00 from holding Tencent Music Entertainment or generate 26.37% 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. The Coca Cola
Performance |
Timeline |
Tencent Music Entert |
Coca Cola |
Tencent Music and Coca Cola Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tencent Music and Coca Cola
The main advantage of trading using opposite Tencent Music and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.Tencent Music vs. Locafy | Tencent Music vs. Rail Vision Ltd | Tencent Music vs. Heartbeam Warrant | Tencent Music vs. Iveda Solutions Warrant |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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