diversifiable risk of combining Tencent Music and Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on Tencent Music and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Meta Platforms.
Diversification Opportunities for Tencent Music and Meta Platforms
Pair Corralation between Tencent Music and Meta Platforms
Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 1.3 times more return on investment than Meta Platforms. However, Tencent Music is 1.3 times more volatile than Meta Platforms. It trades about 0.06 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.07 per unit of risk. If you would invest 457.00 in Tencent Music Entertainment on November 24, 2023 and sell it today you would earn a total of 572.00 from holding Tencent Music Entertainment or generate 125.16% return on investment over 90 days.
Tencent Music Entertainment vs. Meta Platforms
Tencent Music and Meta Platforms Volatility Contrast
Pair Trading with Tencent Music and Meta PlatformsThe main advantage of trading using opposite Tencent Music and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position. The idea behind Tencent Music Entertainment and Meta Platforms 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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