Correlation Between Tencent Music and YY
Can any of the company-specific risk be diversified away by investing in both Tencent Music and YY 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 YY 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 YY Inc Class, you can compare the effects of market volatilities on Tencent Music and YY 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 YY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and YY.
Diversification Opportunities for Tencent Music and YY
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tencent and YY is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and YY Inc Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YY Inc Class 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 YY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YY Inc Class has no effect on the direction of Tencent Music i.e., Tencent Music and YY go up and down completely randomly.
Pair Corralation between Tencent Music and YY
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 1.87 times more return on investment than YY. However, Tencent Music is 1.87 times more volatile than YY Inc Class. It trades about 0.08 of its potential returns per unit of risk. YY Inc Class is currently generating about -0.42 per unit of risk. If you would invest 1,345 in Tencent Music Entertainment on March 7, 2024 and sell it today you would earn a total of 55.00 from holding Tencent Music Entertainment or generate 4.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Tencent Music Entertainment vs. YY Inc Class
Performance |
Timeline |
Tencent Music Entert |
YY Inc Class |
Tencent Music and YY Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tencent Music and YY
The main advantage of trading using opposite Tencent Music and YY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, YY 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 YY will offset losses from the drop in YY's long position.Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Weibo Corp | Tencent Music vs. YY Inc Class |
Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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