Correlation Between Thanh Dat and Song Hong

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

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

Diversification Opportunities for Thanh Dat and Song Hong

0.67

Correlation Coefficient

Thanh Dat  Song Hong

Poor diversification

The 3 months correlation between Thanh and Song is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Thanh Dat Investment 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 Thanh Dat 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 Thanh Dat Investment 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 Thanh Dat i.e., Thanh Dat and Song Hong go up and down completely randomly.

Pair Corralation between Thanh Dat and Song Hong

Assuming the 90 days trading horizon Thanh Dat is expected to generate 1.24 times less return on investment than Song Hong. In addition to that, Thanh Dat is 1.56 times more volatile than Song Hong Garment. It trades about 0.05 of its total potential returns per unit of risk. Song Hong Garment is currently generating about 0.1 per unit of volatility. If you would invest  3,323,567  in Song Hong Garment on September 13, 2024 and sell it today you would earn a total of  1,706,433  from holding Song Hong Garment or generate 51.34% return on investment over 90 days.

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

Thanh Dat Investment  vs.  Song Hong Garment

Thanh Dat Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thanh Dat Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thanh Dat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Song Hong Garment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 9 (%) 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 Thanh Dat and Song Hong

The main advantage of trading using opposite Thanh Dat and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thanh Dat 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 Thanh Dat Investment 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.