Correlation Between China Overseas and SoundHound

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

By analyzing existing cross correlation between China Overseas Land and SoundHound AI, you can compare the effects of market volatilities on China Overseas and SoundHound 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 China Overseas with a short position of SoundHound. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Overseas and SoundHound.

Diversification Opportunities for China Overseas and SoundHound

-0.75

Correlation Coefficient

China Overseas  SoundHound

Pay attention - limited upside

The 3 months correlation between China and SoundHound is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and SoundHound AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoundHound AI and China Overseas 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 China Overseas Land are associated (or correlated) with SoundHound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoundHound AI has no effect on the direction of China Overseas i.e., China Overseas and SoundHound go up and down completely randomly.

Pair Corralation between China Overseas and SoundHound

Assuming the 90 days horizon China Overseas is expected to generate 18.09 times less return on investment than SoundHound. But when comparing it to its historical volatility, China Overseas Land is 2.55 times less risky than SoundHound. It trades about 0.02 of its potential returns per unit of risk. SoundHound AI is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  177.00  in SoundHound AI on October 7, 2024 and sell it today you would earn a total of  1,885  from holding SoundHound AI or generate 1064.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

China Overseas Land  vs.  SoundHound AI

China Overseas Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SoundHound AI

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Overseas and SoundHound

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

The idea behind China Overseas Land and SoundHound AI 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.