Correlation Between Ubisoft Entertainment and Tencent Music

Can any of the company-specific risk be diversified away by investing in both Ubisoft Entertainment and Tencent Music 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 Ubisoft Entertainment and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ubisoft Entertainment SA and Tencent Music Entertainment, you can compare the effects of market volatilities on Ubisoft Entertainment and Tencent Music 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 Ubisoft Entertainment with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ubisoft Entertainment and Tencent Music.

Diversification Opportunities for Ubisoft Entertainment and Tencent Music

-0.17

Correlation Coefficient

Ubisoft Entertainment  Tencent Music

Good diversification

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

Pair Corralation between Ubisoft Entertainment and Tencent Music

Assuming the 90 days horizon Ubisoft Entertainment SA is expected to under-perform the Tencent Music. In addition to that, Ubisoft Entertainment is 1.24 times more volatile than Tencent Music Entertainment. It trades about -0.08 of its total potential returns per unit of risk. Tencent Music Entertainment is currently generating about -0.02 per unit of volatility. If you would invest  1,320  in Tencent Music Entertainment on September 23, 2024 and sell it today you would lose (180.00) from holding Tencent Music Entertainment or give up 13.64% of portfolio value over 90 days.

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

Ubisoft Entertainment SA  vs.  Tencent Music Entertainment

Ubisoft Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ubisoft Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tencent Music Entert

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tencent Music reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ubisoft Entertainment and Tencent Music

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

The idea behind Ubisoft Entertainment SA and Tencent Music Entertainment 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.