Correlation Between Applied Materials and Tencent Music

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

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

Diversification Opportunities for Applied Materials and Tencent Music

-0.54

Correlation Coefficient

Applied Materials  Tencent Music

Excellent diversification

The 3 months correlation between Applied and Tencent is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Tencent Music go up and down completely randomly.

Pair Corralation between Applied Materials and Tencent Music

Assuming the 90 days horizon Applied Materials is expected to generate 1.85 times more return on investment than Tencent Music. However, Applied Materials is 1.85 times more volatile than Tencent Music Entertainment. It trades about 0.18 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  17,162  in Applied Materials on July 26, 2025 and sell it today you would earn a total of  2,218  from holding Applied Materials or generate 12.92% return on investment over 90 days.

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

Applied Materials  vs.  Tencent Music Entertainment

Applied Materials

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Tencent Music Entert

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Music may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Applied Materials and Tencent Music

The main advantage of trading using opposite Applied Materials and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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 Applied Materials 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.