Correlation Between Tencent Music and PFIZER

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

Diversification Opportunities for Tencent Music and PFIZER

-0.17

Correlation Coefficient

Tencent Music  PFIZER

Good diversification

The 3 months correlation between Tencent and PFIZER is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and PFIZER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER 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 PFIZER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFIZER INC has no effect on the direction of Tencent Music i.e., Tencent Music and PFIZER go up and down completely randomly.

Pair Corralation between Tencent Music and PFIZER

Considering the 90-day investment horizon Tencent Music Entertainment is expected to under-perform the PFIZER. In addition to that, Tencent Music is 1.24 times more volatile than PFIZER INC. It trades about -0.16 of its total potential returns per unit of risk. PFIZER INC is currently generating about -0.05 per unit of volatility. If you would invest  9,586  in PFIZER INC on October 15, 2024 and sell it today you would lose (156.00) from holding PFIZER INC or give up 1.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  PFIZER INC

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.

PFIZER INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER 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 PFIZER

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

The idea behind Tencent Music Entertainment and PFIZER 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.