Correlation Between Zedge and Tencent Music

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

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

Diversification Opportunities for Zedge and Tencent Music

0.22

Correlation Coefficient

Zedge  Tencent Music

Modest diversification

The 3 months correlation between Zedge and Tencent is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zedge Inc 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 Zedge 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 Zedge Inc 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 Zedge i.e., Zedge and Tencent Music go up and down completely randomly.

Pair Corralation between Zedge and Tencent Music

Given the investment horizon of 90 days Zedge Inc is expected to generate 2.96 times more return on investment than Tencent Music. However, Zedge is 2.96 times more volatile than Tencent Music Entertainment. It trades about 0.05 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about -0.05 per unit of risk. If you would invest  255.00  in Zedge Inc on October 22, 2024 and sell it today you would earn a total of  14.00  from holding Zedge Inc or generate 5.49% return on investment over 90 days.

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

Zedge Inc  vs.  Tencent Music Entertainment

Zedge Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zedge Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zedge is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Zedge and Tencent Music

The main advantage of trading using opposite Zedge and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zedge 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 Zedge Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.