Correlation Between Tencent Music and OFAL

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

Diversification Opportunities for Tencent Music and OFAL

-0.56

Correlation Coefficient

Tencent Music  OFAL

Excellent diversification

The 3 months correlation between Tencent and OFAL is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and OFAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFAL 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 OFAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFAL has no effect on the direction of Tencent Music i.e., Tencent Music and OFAL go up and down completely randomly.

Pair Corralation between Tencent Music and OFAL

Considering the 90-day investment horizon Tencent Music Entertainment is expected to generate 0.18 times more return on investment than OFAL. However, Tencent Music Entertainment is 5.55 times less risky than OFAL. It trades about 0.25 of its potential returns per unit of risk. OFAL is currently generating about -0.08 per unit of risk. If you would invest  1,791  in Tencent Music Entertainment on May 26, 2025 and sell it today you would earn a total of  744.00  from holding Tencent Music Entertainment or generate 41.54% return on investment over 90 days.

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

Tencent Music Entertainment  vs.  OFAL

Tencent Music Entert

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 19 (%) 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.

OFAL

Risk-Adjusted Performance

Weakest

Over the last 90 days OFAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in September 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tencent Music and OFAL

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

The idea behind Tencent Music Entertainment and OFAL 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.