Correlation Between PROSIEBENSAT1 MEDIADR4/ and Tencent Music

Can any of the company-specific risk be diversified away by investing in both PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4/ and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PROSIEBENSAT1 MEDIADR4 and Tencent Music Entertainment, you can compare the effects of market volatilities on PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4/ with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROSIEBENSAT1 MEDIADR4/ and Tencent Music.

Diversification Opportunities for PROSIEBENSAT1 MEDIADR4/ and Tencent Music

0.15

Correlation Coefficient

PROSIEBENSAT1 MEDIADR4/  Tencent Music

Average diversification

The 3 months correlation between PROSIEBENSAT1 and Tencent is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PROSIEBENSAT1 MEDIADR4 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 PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4 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 PROSIEBENSAT1 MEDIADR4/ i.e., PROSIEBENSAT1 MEDIADR4/ and Tencent Music go up and down completely randomly.

Pair Corralation between PROSIEBENSAT1 MEDIADR4/ and Tencent Music

Assuming the 90 days trading horizon PROSIEBENSAT1 MEDIADR4/ is expected to generate 12.07 times less return on investment than Tencent Music. But when comparing it to its historical volatility, PROSIEBENSAT1 MEDIADR4 is 1.0 times less risky than Tencent Music. It trades about 0.0 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  756.00  in Tencent Music Entertainment on September 28, 2024 and sell it today you would earn a total of  364.00  from holding Tencent Music Entertainment or generate 48.15% return on investment over 90 days.

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

PROSIEBENSAT1 MEDIADR4  vs.  Tencent Music Entertainment

PROSIEBENSAT1 MEDIADR4/

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROSIEBENSAT1 MEDIADR4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tencent Music Entert

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with PROSIEBENSAT1 MEDIADR4/ and Tencent Music

The main advantage of trading using opposite PROSIEBENSAT1 MEDIADR4/ and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.