Correlation Between Hongfa Technology and Songz Automobile

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

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

Diversification Opportunities for Hongfa Technology and Songz Automobile

0.76

Correlation Coefficient

Hongfa Technology  Songz Automobile

Poor diversification

The 3 months correlation between Hongfa and Songz is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hongfa Technology Co 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 Hongfa Technology 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 Hongfa Technology Co 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 Hongfa Technology i.e., Hongfa Technology and Songz Automobile go up and down completely randomly.

Pair Corralation between Hongfa Technology and Songz Automobile

Assuming the 90 days trading horizon Hongfa Technology Co is expected to generate 0.85 times more return on investment than Songz Automobile. However, Hongfa Technology Co is 1.18 times less risky than Songz Automobile. It trades about 0.13 of its potential returns per unit of risk. Songz Automobile Air is currently generating about 0.03 per unit of risk. If you would invest  3,168  in Hongfa Technology Co on December 30, 2024 and sell it today you would earn a total of  427.00  from holding Hongfa Technology Co or generate 13.48% return on investment over 90 days.

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

Hongfa Technology Co  vs.  Songz Automobile Air

Hongfa Technology

Risk-Adjusted Performance

OK

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

Songz Automobile Air

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Songz Automobile Air are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Songz Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hongfa Technology and Songz Automobile

The main advantage of trading using opposite Hongfa Technology and Songz Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongfa Technology 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 Hongfa Technology Co 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.