Correlation Between Song Hong and Industrial Urban

Can any of the company-specific risk be diversified away by investing in both Song Hong and Industrial Urban 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 Industrial Urban 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 Industrial Urban Development, you can compare the effects of market volatilities on Song Hong and Industrial Urban 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 Industrial Urban. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Hong and Industrial Urban.

Diversification Opportunities for Song Hong and Industrial Urban

0.15

Correlation Coefficient

Song Hong  Industrial Urban

Average diversification

The 3 months correlation between Song and Industrial is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Construction and Industrial Urban Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Urban Dev 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 Industrial Urban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Urban Dev has no effect on the direction of Song Hong i.e., Song Hong and Industrial Urban go up and down completely randomly.

Pair Corralation between Song Hong and Industrial Urban

Assuming the 90 days trading horizon Song Hong is expected to generate 1.59 times less return on investment than Industrial Urban. In addition to that, Song Hong is 1.16 times more volatile than Industrial Urban Development. It trades about 0.04 of its total potential returns per unit of risk. Industrial Urban Development is currently generating about 0.08 per unit of volatility. If you would invest  1,567,904  in Industrial Urban Development on October 26, 2024 and sell it today you would earn a total of  1,892,096  from holding Industrial Urban Development or generate 120.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.72%
Values	Daily Returns

Song Hong Construction  vs.  Industrial Urban Development

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.

Industrial Urban Dev

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Song Hong and Industrial Urban

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

The idea behind Song Hong Construction and Industrial Urban Development 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.