Correlation Between Tencent Music and Flutter Entertainment

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

Diversification Opportunities for Tencent Music and Flutter Entertainment

0.89

Correlation Coefficient

Tencent Music  Flutter Entertainment

Very poor diversification

The 3 months correlation between Tencent and Flutter is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Flutter Entertainment plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment plc 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment plc has no effect on the direction of Tencent Music i.e., Tencent Music and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Tencent Music and Flutter Entertainment

Considering the 90-day investment horizon Tencent Music Entertainment is expected to under-perform the Flutter Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Music Entertainment is 1.25 times less risky than Flutter Entertainment. The stock trades about -0.21 of its potential returns per unit of risk. The Flutter Entertainment plc is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  27,993  in Flutter Entertainment plc on September 16, 2025 and sell it today you would lose (5,689) from holding Flutter Entertainment plc or give up 20.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Tencent Music Entertainment  vs.  Flutter Entertainment plc

Tencent Music Entert

Risk-Adjusted Performance

Weakest

Over the last 90 days Tencent Music Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2026. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Flutter Entertainment plc

Risk-Adjusted Performance

Weakest

Over the last 90 days Flutter Entertainment plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2026. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tencent Music and Flutter Entertainment

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

The idea behind Tencent Music Entertainment and Flutter Entertainment plc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.