Correlation Between Tencent Music and Natural Health
Can any of the company-specific risk be diversified away by investing in both Tencent Music and Natural Health 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 Natural Health 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 Natural Health Trends, you can compare the effects of market volatilities on Tencent Music and Natural Health 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 Natural Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Music and Natural Health.
Diversification Opportunities for Tencent Music and Natural Health
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tencent and Natural is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Music Entertainment and Natural Health Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Health Trends 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 Natural Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Health Trends has no effect on the direction of Tencent Music i.e., Tencent Music and Natural Health go up and down completely randomly.
Pair Corralation between Tencent Music and Natural Health
Assuming the 90 days trading horizon Tencent Music Entertainment is expected to under-perform the Natural Health. But the stock apears to be less risky and, when comparing its historical volatility, Tencent Music Entertainment is 1.65 times less risky than Natural Health. The stock trades about -0.27 of its potential returns per unit of risk. The Natural Health Trends is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 420.00 in Natural Health Trends on October 24, 2024 and sell it today you would earn a total of 58.00 from holding Natural Health Trends or generate 13.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tencent Music Entertainment vs. Natural Health Trends
Performance |
| Timeline |
| Tencent Music Entert |
| Natural Health Trends |
Tencent Music and Natural Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Music and Natural Health
The main advantage of trading using opposite Tencent Music and Natural Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Music position performs unexpectedly, Natural Health 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 Natural Health will offset losses from the drop in Natural Health's long position.| Tencent Music vs. Yuexiu Transport Infrastructure | Tencent Music vs. FAST RETAIL ADR | Tencent Music vs. Indutrade AB | Tencent Music vs. Fast Retailing Co |
| Natural Health vs. United Insurance Holdings | Natural Health vs. JSC Halyk bank | Natural Health vs. Virtu Financial | Natural Health vs. Eurasia Mining Plc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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