Correlation Between Tencent Music and MARTIN

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

Diversification Opportunities for Tencent Music and MARTIN

0.42

Correlation Coefficient

Tencent Music  MARTIN

Very weak diversification

The 3 months correlation between Tencent and MARTIN is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and MARTIN MARIETTA MATLS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARTIN MARIETTA MATLS 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 MARTIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARTIN MARIETTA MATLS has no effect on the direction of Tencent Music i.e., Tencent Music and MARTIN go up and down completely randomly.

Pair Corralation between Tencent Music and MARTIN

Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 4.87 times more return on investment than MARTIN. However, Tencent Music is 4.87 times more volatile than MARTIN MARIETTA MATLS. It trades about -0.03 of its potential returns per unit of risk. MARTIN MARIETTA MATLS is currently generating about -0.17 per unit of risk. If you would invest  1,178  in Tencent Music Entertainment on October 8, 2024 and sell it today you would lose (62.00) from holding Tencent Music Entertainment or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

Tencent Music Entertainment  vs.  MARTIN MARIETTA MATLS

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 latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MARTIN MARIETTA MATLS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARTIN MARIETTA MATLS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARTIN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tencent Music and MARTIN

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

The idea behind Tencent Music Entertainment and MARTIN MARIETTA MATLS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.