Correlation Between Binh Duong and Song Hong

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

By analyzing existing cross correlation between Binh Duong Construction and Song Hong Construction, you can compare the effects of market volatilities on Binh Duong and Song Hong 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 Binh Duong with a short position of Song Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Duong and Song Hong.

Diversification Opportunities for Binh Duong and Song Hong

0.16

Correlation Coefficient

Binh Duong  Song Hong

Average diversification

The 3 months correlation between Binh and Song is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Construction and Song Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Construction and Binh Duong 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 Binh Duong Construction are associated (or correlated) with Song Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Song Hong Construction has no effect on the direction of Binh Duong i.e., Binh Duong and Song Hong go up and down completely randomly.

Pair Corralation between Binh Duong and Song Hong

Assuming the 90 days trading horizon Binh Duong Construction is expected to generate 0.45 times more return on investment than Song Hong. However, Binh Duong Construction is 2.24 times less risky than Song Hong. It trades about 0.11 of its potential returns per unit of risk. Song Hong Construction is currently generating about 0.02 per unit of risk. If you would invest  600,000  in Binh Duong Construction on September 15, 2024 and sell it today you would earn a total of  115,000  from holding Binh Duong Construction or generate 19.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.78%
Values	Daily Returns

Binh Duong Construction  vs.  Song Hong Construction

Binh Duong Construction

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Construction are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

Song Hong Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Song Hong is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Binh Duong and Song Hong

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

The idea behind Binh Duong Construction and Song Hong Construction 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.