Correlation Between Tencent Music and Griffon

Can any of the company-specific risk be diversified away by investing in both Tencent Music and Griffon 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 Griffon 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 Griffon 575, you can compare the effects of market volatilities on Tencent Music and Griffon 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 Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Griffon.

Diversification Opportunities for Tencent Music and Griffon

-0.05

Correlation Coefficient

Tencent Music  Griffon

Good diversification

The 3 months correlation between Tencent and Griffon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Griffon 575 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 575 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon 575 has no effect on the direction of Tencent Music i.e., Tencent Music and Griffon go up and down completely randomly.

Pair Corralation between Tencent Music and Griffon

Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 3.88 times more return on investment than Griffon. However, Tencent Music is 3.88 times more volatile than Griffon 575. It trades about 0.04 of its potential returns per unit of risk. Griffon 575 is currently generating about 0.01 per unit of risk. If you would invest  788.00  in Tencent Music Entertainment on September 4, 2024 and sell it today you would earn a total of  431.00  from holding Tencent Music Entertainment or generate 54.7% return on investment over 90 days.

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

Tencent Music Entertainment  vs.  Griffon 575

Tencent Music Entert

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Tencent Music exhibited solid returns over the last few months and may actually be approaching a breakup point.

Griffon 575

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Griffon 575 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Griffon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tencent Music and Griffon

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

The idea behind Tencent Music Entertainment and Griffon 575 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..