Correlation Between Tencent Music and Novanta
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Novanta 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 Novanta 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 Novanta, you can compare the effects of market volatilities on Tencent Music and Novanta 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 Novanta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Novanta.
Diversification Opportunities for Tencent Music and Novanta
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tencent and Novanta is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta 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 Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Tencent Music i.e., Tencent Music and Novanta go up and down completely randomly.
Pair Corralation between Tencent Music and Novanta
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to generate 0.98 times more return on investment than Novanta. However, Tencent Music Entertainment is 1.02 times less risky than Novanta. It trades about 0.08 of its potential returns per unit of risk. Novanta is currently generating about -0.03 per unit of risk. If you would invest 1,020 in Tencent Music Entertainment on September 1, 2024 and sell it today you would earn a total of 40.00 from holding Tencent Music Entertainment or generate 3.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Novanta
Performance |
| Timeline |
| Tencent Music Entert |
| Novanta |
Tencent Music and Novanta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Novanta
The main advantage of trading using opposite Tencent Music and Novanta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Novanta 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 Novanta will offset losses from the drop in Novanta's long position.| Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc | Tencent Music vs. Apple Inc |
| Novanta vs. TROPHY GAMES DEV | Novanta vs. ScanSource | Novanta vs. GigaMedia | Novanta vs. FRACTAL GAMING GROUP |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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