Correlation Between Tencent Music and Nexstar Media

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

Diversification Opportunities for Tencent Music and Nexstar Media

0.82

Correlation Coefficient

Tencent Music  Nexstar Media

Very poor diversification

The 3 months correlation between Tencent and Nexstar is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Nexstar Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Media Group 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 Nexstar Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Media Group has no effect on the direction of Tencent Music i.e., Tencent Music and Nexstar Media go up and down completely randomly.

Pair Corralation between Tencent Music and Nexstar Media

Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 1.35 times more return on investment than Nexstar Media. However, Tencent Music is 1.35 times more volatile than Nexstar Media Group. It trades about 0.32 of its potential returns per unit of risk. Nexstar Media Group is currently generating about 0.17 per unit of risk. If you would invest  1,090  in Tencent Music Entertainment on April 20, 2025 and sell it today you would earn a total of  830.00  from holding Tencent Music Entertainment or generate 76.15% return on investment over 90 days.

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

Tencent Music Entertainment  vs.  Nexstar Media Group

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 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tencent Music reported solid returns over the last few months and may actually be approaching a breakup point.

Nexstar Media Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Media Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nexstar Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tencent Music and Nexstar Media

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

The idea behind Tencent Music Entertainment and Nexstar Media Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.