Correlation Between Tencent Music and UNITEDHEALTH

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

Diversification Opportunities for Tencent Music and UNITEDHEALTH

0.06

Correlation Coefficient

Tencent Music  UNITEDHEALTH

Significant diversification

The 3 months correlation between Tencent and UNITEDHEALTH is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP 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 UNITEDHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITEDHEALTH GROUP INC has no effect on the direction of Tencent Music i.e., Tencent Music and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Tencent Music and UNITEDHEALTH

Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 12.04 times more return on investment than UNITEDHEALTH. However, Tencent Music is 12.04 times more volatile than UNITEDHEALTH GROUP INC. It trades about 0.04 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.01 per unit of risk. If you would invest  862.00  in Tencent Music Entertainment on September 28, 2024 and sell it today you would earn a total of  318.50  from holding Tencent Music Entertainment or generate 36.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tencent Music Entertainment  vs.  UNITEDHEALTH GROUP 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 rather sound primary indicators, Tencent Music is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tencent Music and UNITEDHEALTH

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

The idea behind Tencent Music Entertainment and UNITEDHEALTH GROUP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.