Correlation Between DOMESCO Medical and Song Hong

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

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

Diversification Opportunities for DOMESCO Medical and Song Hong

0.55

Correlation Coefficient

DOMESCO Medical  Song Hong

Very weak diversification

The 3 months correlation between DOMESCO and Song is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding DOMESCO Medical Import 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 DOMESCO Medical 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 DOMESCO Medical Import 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 DOMESCO Medical i.e., DOMESCO Medical and Song Hong go up and down completely randomly.

Pair Corralation between DOMESCO Medical and Song Hong

Assuming the 90 days trading horizon DOMESCO Medical Import is expected to generate 1.35 times more return on investment than Song Hong. However, DOMESCO Medical is 1.35 times more volatile than Song Hong Construction. It trades about 0.32 of its potential returns per unit of risk. Song Hong Construction is currently generating about 0.01 per unit of risk. If you would invest  6,730,000  in DOMESCO Medical Import on October 27, 2024 and sell it today you would earn a total of  1,570,000  from holding DOMESCO Medical Import or generate 23.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.67%
Values	Daily Returns

DOMESCO Medical Import  vs.  Song Hong Construction

DOMESCO Medical Import

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DOMESCO Medical Import are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, DOMESCO Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Song Hong Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Song Hong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DOMESCO Medical and Song Hong

The main advantage of trading using opposite DOMESCO Medical and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOMESCO Medical 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 DOMESCO Medical Import 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.