Correlation Between Ba Ria and Song Hong

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

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

Diversification Opportunities for Ba Ria and Song Hong

0.82

Correlation Coefficient

Ba Ria  Song Hong

Very poor diversification

The 3 months correlation between BTP and Song is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ba Ria Thermal and Song Hong Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Aluminum and Ba Ria 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 Ba Ria Thermal 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 Aluminum has no effect on the direction of Ba Ria i.e., Ba Ria and Song Hong go up and down completely randomly.

Pair Corralation between Ba Ria and Song Hong

Assuming the 90 days trading horizon Ba Ria is expected to generate 1.55 times less return on investment than Song Hong. But when comparing it to its historical volatility, Ba Ria Thermal is 1.84 times less risky than Song Hong. It trades about 0.02 of its potential returns per unit of risk. Song Hong Aluminum is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  440,000  in Song Hong Aluminum on October 8, 2024 and sell it today you would earn a total of  10,000  from holding Song Hong Aluminum or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.39%
Values	Daily Returns

Ba Ria Thermal  vs.  Song Hong Aluminum

Ba Ria Thermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ba Ria Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Song Hong Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Song Hong Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Ba Ria and Song Hong

The main advantage of trading using opposite Ba Ria and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ba Ria 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 Ba Ria Thermal and Song Hong Aluminum 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.