Correlation Between Global Electrical and Song Hong

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

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

Diversification Opportunities for Global Electrical and Song Hong

0.87

Correlation Coefficient

Global Electrical  Song Hong

Very poor diversification

The 3 months correlation between Global and Song is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global Electrical Technology and Song Hong Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Aluminum and Global Electrical 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 Global Electrical Technology 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 Aluminum has no effect on the direction of Global Electrical i.e., Global Electrical and Song Hong go up and down completely randomly.

Pair Corralation between Global Electrical and Song Hong

Assuming the 90 days trading horizon Global Electrical Technology is expected to under-perform the Song Hong. In addition to that, Global Electrical is 2.06 times more volatile than Song Hong Aluminum. It trades about -0.04 of its total potential returns per unit of risk. Song Hong Aluminum is currently generating about -0.07 per unit of volatility. If you would invest  520,000  in Song Hong Aluminum on September 14, 2024 and sell it today you would lose (60,000) from holding Song Hong Aluminum or give up 11.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	64.06%
Values	Daily Returns

Global Electrical Technology  vs.  Song Hong Aluminum

Global Electrical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Electrical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Song Hong Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Song Hong Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Global Electrical and Song Hong

The main advantage of trading using opposite Global Electrical and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Electrical 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 Global Electrical Technology and Song Hong Aluminum 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 Transaction History module to view history of all your transactions and understand their impact on performance.