Correlation Between Song Hong and Global Electrical
Can any of the company-specific risk be diversified away by investing in both Song Hong and Global Electrical 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 Global Electrical 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 Global Electrical Technology, you can compare the effects of market volatilities on Song Hong and Global Electrical 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 Global Electrical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Hong and Global Electrical.
Diversification Opportunities for Song Hong and Global Electrical
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Song and Global is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Aluminum and Global Electrical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Electrical 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 Global Electrical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Electrical has no effect on the direction of Song Hong i.e., Song Hong and Global Electrical go up and down completely randomly.
Pair Corralation between Song Hong and Global Electrical
Assuming the 90 days trading horizon Song Hong Aluminum is expected to generate 0.46 times more return on investment than Global Electrical. However, Song Hong Aluminum is 2.16 times less risky than Global Electrical. It trades about -0.1 of its potential returns per unit of risk. Global Electrical Technology is currently generating about -0.05 per unit of risk. If you would invest 480,000 in Song Hong Aluminum on September 2, 2024 and sell it today you would lose (30,000) from holding Song Hong Aluminum or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 57.14% |
| Values | Daily Returns |
Song Hong Aluminum vs. Global Electrical Technology
Performance |
| Timeline |
| Song Hong Aluminum |
| Global Electrical |
Song Hong and Global Electrical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Song Hong and Global Electrical
The main advantage of trading using opposite Song Hong and Global Electrical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Song Hong position performs unexpectedly, Global Electrical 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 Global Electrical will offset losses from the drop in Global Electrical'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 |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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