Correlation Between 1369 Construction and Song Hong

Can any of the company-specific risk be diversified away by investing in both 1369 Construction 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 1369 Construction and Song Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1369 Construction JSC and Song Hong Aluminum, you can compare the effects of market volatilities on 1369 Construction 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 1369 Construction with a short position of Song Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1369 Construction and Song Hong.

Diversification Opportunities for 1369 Construction and Song Hong

0.41

Correlation Coefficient

1369 Construction  Song Hong

Very weak diversification

The 3 months correlation between 1369 and Song is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding 1369 Construction JSC 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 1369 Construction 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 1369 Construction JSC 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 1369 Construction i.e., 1369 Construction and Song Hong go up and down completely randomly.

Pair Corralation between 1369 Construction and Song Hong

Assuming the 90 days trading horizon 1369 Construction JSC is expected to under-perform the Song Hong. But the stock apears to be less risky and, when comparing its historical volatility, 1369 Construction JSC is 2.37 times less risky than Song Hong. The stock trades about -0.01 of its potential returns per unit of risk. The Song Hong Aluminum is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  450,000  in Song Hong Aluminum on December 10, 2024 and sell it today you would earn a total of  90,000  from holding Song Hong Aluminum or generate 20.0% return on investment over 90 days.

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

1369 Construction JSC  vs.  Song Hong Aluminum

1369 Construction JSC

Risk-Adjusted Performance

Very Weak

Over the last 90 days 1369 Construction JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, 1369 Construction is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Song Hong Aluminum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Aluminum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Song Hong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1369 Construction and Song Hong

The main advantage of trading using opposite 1369 Construction and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1369 Construction 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 1369 Construction JSC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.