Correlation Between Song Hong and Binh Duong

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

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

Diversification Opportunities for Song Hong and Binh Duong

0.16

Correlation Coefficient

Song Hong  Binh Duong

Average diversification

The 3 months correlation between Song and Binh is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Construction and Binh Duong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Duong Construction and Song Hong 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 Song Hong Construction are associated (or correlated) with Binh Duong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Duong Construction has no effect on the direction of Song Hong i.e., Song Hong and Binh Duong go up and down completely randomly.

Pair Corralation between Song Hong and Binh Duong

Assuming the 90 days trading horizon Song Hong is expected to generate 2.37 times less return on investment than Binh Duong. In addition to that, Song Hong is 2.24 times more volatile than Binh Duong Construction. It trades about 0.02 of its total potential returns per unit of risk. Binh Duong Construction is currently generating about 0.11 per unit of volatility. If you would invest  600,000  in Binh Duong Construction on September 15, 2024 and sell it today you would earn a total of  115,000  from holding Binh Duong Construction or generate 19.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.78%
Values	Daily Returns

Song Hong Construction  vs.  Binh Duong Construction

Song Hong Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Song Hong is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Binh Duong Construction

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Construction are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Song Hong and Binh Duong

The main advantage of trading using opposite Song Hong and Binh Duong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Song Hong position performs unexpectedly, Binh Duong 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 Binh Duong will offset losses from the drop in Binh Duong's long position.

The idea behind Song Hong Construction and Binh Duong 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.