Correlation Between Song Hong and South Basic
Can any of the company-specific risk be diversified away by investing in both Song Hong and South Basic 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 South Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Song Hong Aluminum and South Basic Chemicals, you can compare the effects of market volatilities on Song Hong and South Basic 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 South Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Hong and South Basic.
Diversification Opportunities for Song Hong and South Basic
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Song and South is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Aluminum and South Basic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Basic Chemicals 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 Aluminum are associated (or correlated) with South Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Basic Chemicals has no effect on the direction of Song Hong i.e., Song Hong and South Basic go up and down completely randomly.
Pair Corralation between Song Hong and South Basic
Assuming the 90 days trading horizon Song Hong Aluminum is expected to generate 0.56 times more return on investment than South Basic. However, Song Hong Aluminum is 1.8 times less risky than South Basic. It trades about 0.01 of its potential returns per unit of risk. South Basic Chemicals is currently generating about -0.04 per unit of risk. If you would invest 450,000 in Song Hong Aluminum on October 30, 2024 and sell it today you would lose (10,000) from holding Song Hong Aluminum or give up 2.22% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Song Hong Aluminum vs. South Basic Chemicals
Performance |
Timeline |
Song Hong Aluminum |
South Basic Chemicals |
Song Hong and South Basic Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Song Hong and South Basic
The main advantage of trading using opposite Song Hong and South Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Song Hong position performs unexpectedly, South Basic 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 South Basic will offset losses from the drop in South Basic's long position.Song Hong vs. Long Giang Investment | Song Hong vs. Din Capital Investment | Song Hong vs. Saigon Viendong Technology | Song Hong vs. Tienlen Steel Corp |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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