Correlation Between Tencent Music and Lava Medtech

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

Diversification Opportunities for Tencent Music and Lava Medtech

0.0

Correlation Coefficient

Tencent Music  Lava Medtech

Pay attention - limited upside

The 3 months correlation between Tencent and Lava is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Lava Medtech Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lava Medtech Acquisition 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 Lava Medtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lava Medtech Acquisition has no effect on the direction of Tencent Music i.e., Tencent Music and Lava Medtech go up and down completely randomly.

Pair Corralation between Tencent Music and Lava Medtech

If you would invest  1,179  in Tencent Music Entertainment on December 19, 2024 and sell it today you would earn a total of  330.00  from holding Tencent Music Entertainment or generate 27.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  Lava Medtech Acquisition

Tencent Music Entert

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Tencent Music exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lava Medtech Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lava Medtech Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Lava Medtech is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tencent Music and Lava Medtech

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

The idea behind Tencent Music Entertainment and Lava Medtech Acquisition 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.