Correlation Between Song Hong and Van Dien
Can any of the company-specific risk be diversified away by investing in both Song Hong and Van Dien 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 Song Hong and Van Dien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Song Hong Garment and Van Dien Fused, you can compare the effects of market volatilities on Song Hong and Van Dien 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 Song Hong with a short position of Van Dien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Hong and Van Dien.
Diversification Opportunities for Song Hong and Van Dien
Poor diversification
The 3 months correlation between Song and Van is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Garment and Van Dien Fused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Dien Fused and Song Hong 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 Song Hong Garment are associated (or correlated) with Van Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Dien Fused has no effect on the direction of Song Hong i.e., Song Hong and Van Dien go up and down completely randomly.
Pair Corralation between Song Hong and Van Dien
Assuming the 90 days trading horizon Song Hong is expected to generate 3.72 times less return on investment than Van Dien. But when comparing it to its historical volatility, Song Hong Garment is 1.59 times less risky than Van Dien. It trades about 0.01 of its potential returns per unit of risk. Van Dien Fused is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,395,000 in Van Dien Fused on September 15, 2024 and sell it today you would earn a total of 5,000 from holding Van Dien Fused or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 50.0% |
| Values | Daily Returns |
Song Hong Garment vs. Van Dien Fused
Performance |
| Timeline |
| Song Hong Garment |
| Van Dien Fused |
Song Hong and Van Dien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Song Hong and Van Dien
The main advantage of trading using opposite Song Hong and Van Dien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Song Hong position performs unexpectedly, Van Dien 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 Van Dien will offset losses from the drop in Van Dien's long position.| Song Hong vs. FIT INVEST JSC | Song Hong vs. Damsan JSC | Song Hong vs. An Phat Plastic | Song Hong vs. Alphanam ME |
| Van Dien vs. Song Hong Garment | Van Dien vs. Alphanam ME | Van Dien vs. Hochiminh City Metal | Van Dien vs. Atesco Industrial Cartering |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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