Correlation Between GKHT Medical and Songz Automobile

Can any of the company-specific risk be diversified away by investing in both GKHT Medical and Songz Automobile 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 GKHT Medical and Songz Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GKHT Medical Technology and Songz Automobile Air, you can compare the effects of market volatilities on GKHT Medical and Songz Automobile 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 GKHT Medical with a short position of Songz Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of GKHT Medical and Songz Automobile.

Diversification Opportunities for GKHT Medical and Songz Automobile

0.87

Correlation Coefficient

GKHT Medical  Songz Automobile

Very poor diversification

The 3 months correlation between GKHT and Songz is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GKHT Medical Technology and Songz Automobile Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songz Automobile Air and GKHT Medical 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 GKHT Medical Technology are associated (or correlated) with Songz Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songz Automobile Air has no effect on the direction of GKHT Medical i.e., GKHT Medical and Songz Automobile go up and down completely randomly.

Pair Corralation between GKHT Medical and Songz Automobile

Assuming the 90 days trading horizon GKHT Medical Technology is expected to under-perform the Songz Automobile. In addition to that, GKHT Medical is 1.16 times more volatile than Songz Automobile Air. It trades about -0.07 of its total potential returns per unit of risk. Songz Automobile Air is currently generating about -0.05 per unit of volatility. If you would invest  706.00  in Songz Automobile Air on September 21, 2024 and sell it today you would lose (16.00) from holding Songz Automobile Air or give up 2.27% of portfolio value over 90 days.

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

GKHT Medical Technology  vs.  Songz Automobile Air

GKHT Medical Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GKHT Medical Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GKHT Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Songz Automobile Air

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Songz Automobile Air are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Songz Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GKHT Medical and Songz Automobile

The main advantage of trading using opposite GKHT Medical and Songz Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GKHT Medical position performs unexpectedly, Songz Automobile 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 Songz Automobile will offset losses from the drop in Songz Automobile's long position.

The idea behind GKHT Medical Technology and Songz Automobile Air 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.