Correlation Between Danang Port and Song Hong

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

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

Diversification Opportunities for Danang Port and Song Hong

0.62

Correlation Coefficient

Danang Port  Song Hong

Poor diversification

The 3 months correlation between Danang and Song is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Danang Port JSC and Song Hong Garment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Garment and Danang Port 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 Danang Port 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 Garment has no effect on the direction of Danang Port i.e., Danang Port and Song Hong go up and down completely randomly.

Pair Corralation between Danang Port and Song Hong

Assuming the 90 days trading horizon Danang Port JSC is expected to generate 0.75 times more return on investment than Song Hong. However, Danang Port JSC is 1.34 times less risky than Song Hong. It trades about 0.07 of its potential returns per unit of risk. Song Hong Garment is currently generating about -0.23 per unit of risk. If you would invest  3,270,000  in Danang Port JSC on October 21, 2024 and sell it today you would earn a total of  50,000  from holding Danang Port JSC or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Danang Port JSC  vs.  Song Hong Garment

Danang Port JSC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danang Port JSC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Danang Port may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Song Hong Garment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 10 (%) 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 Danang Port and Song Hong

The main advantage of trading using opposite Danang Port and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danang Port 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 Danang Port JSC and Song Hong Garment 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.