Correlation Between Elcom Technology and Song Hong

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

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

Diversification Opportunities for Elcom Technology and Song Hong

0.73

Correlation Coefficient

Elcom Technology  Song Hong

Poor diversification

The 3 months correlation between Elcom and Song is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Elcom Technology Communication 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 Elcom Technology 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 Elcom Technology Communications 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 Elcom Technology i.e., Elcom Technology and Song Hong go up and down completely randomly.

Pair Corralation between Elcom Technology and Song Hong

Assuming the 90 days trading horizon Elcom Technology is expected to generate 3.67 times less return on investment than Song Hong. In addition to that, Elcom Technology is 1.47 times more volatile than Song Hong Garment. It trades about 0.02 of its total potential returns per unit of risk. Song Hong Garment is currently generating about 0.11 per unit of volatility. If you would invest  3,164,303  in Song Hong Garment on September 14, 2024 and sell it today you would earn a total of  2,035,697  from holding Song Hong Garment or generate 64.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Elcom Technology Communication  vs.  Song Hong Garment

Elcom Technology Com

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Song Hong Garment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 12 (%) 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 Elcom Technology and Song Hong

The main advantage of trading using opposite Elcom Technology and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elcom Technology 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 Elcom Technology Communications 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.