Correlation Between Song Ho and Yong Shun

Can any of the company-specific risk be diversified away by investing in both Song Ho and Yong Shun 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 Ho and Yong Shun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Song Ho Industrial and Yong Shun Chemical, you can compare the effects of market volatilities on Song Ho and Yong Shun 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 Ho with a short position of Yong Shun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Ho and Yong Shun.

Diversification Opportunities for Song Ho and Yong Shun

-0.18

Correlation Coefficient

Song Ho  Yong Shun

Good diversification

The 3 months correlation between Song and Yong is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Song Ho Industrial and Yong Shun Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yong Shun Chemical and Song Ho 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 Ho Industrial are associated (or correlated) with Yong Shun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yong Shun Chemical has no effect on the direction of Song Ho i.e., Song Ho and Yong Shun go up and down completely randomly.

Pair Corralation between Song Ho and Yong Shun

Assuming the 90 days trading horizon Song Ho Industrial is expected to under-perform the Yong Shun. But the stock apears to be less risky and, when comparing its historical volatility, Song Ho Industrial is 2.43 times less risky than Yong Shun. The stock trades about 0.0 of its potential returns per unit of risk. The Yong Shun Chemical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,429  in Yong Shun Chemical on October 10, 2024 and sell it today you would earn a total of  61.00  from holding Yong Shun Chemical or generate 4.27% return on investment over 90 days.

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

Song Ho Industrial  vs.  Yong Shun Chemical

Song Ho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Song Ho Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Song Ho is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yong Shun Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yong Shun Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Song Ho and Yong Shun

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

The idea behind Song Ho Industrial and Yong Shun Chemical 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.