Correlation Between SENECA FOODS-A and Tencent Music

Can any of the company-specific risk be diversified away by investing in both SENECA FOODS-A and Tencent Music 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 SENECA FOODS-A and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SENECA FOODS A and Tencent Music Entertainment, you can compare the effects of market volatilities on SENECA FOODS-A and Tencent Music 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 SENECA FOODS-A with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS-A and Tencent Music.

Diversification Opportunities for SENECA FOODS-A and Tencent Music

0.3

Correlation Coefficient

SENECA FOODS-A  Tencent Music

Weak diversification

The 3 months correlation between SENECA and Tencent is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and Tencent Music Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Music Entert and SENECA FOODS-A 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 SENECA FOODS A are associated (or correlated) with Tencent Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Music Entert has no effect on the direction of SENECA FOODS-A i.e., SENECA FOODS-A and Tencent Music go up and down completely randomly.

Pair Corralation between SENECA FOODS-A and Tencent Music

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 0.84 times more return on investment than Tencent Music. However, SENECA FOODS A is 1.19 times less risky than Tencent Music. It trades about 0.13 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.08 per unit of risk. If you would invest  5,250  in SENECA FOODS A on September 3, 2024 and sell it today you would earn a total of  1,200  from holding SENECA FOODS A or generate 22.86% return on investment over 90 days.

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

SENECA FOODS A  vs.  Tencent Music Entertainment

SENECA FOODS A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, SENECA FOODS-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tencent Music Entert

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tencent Music Entertainment are ranked lower than 6 (%) 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.

Pair Trading with SENECA FOODS-A and Tencent Music

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

The idea behind SENECA FOODS A and Tencent Music Entertainment 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.