Correlation Between Song Hong and Japan Vietnam

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

Diversification Opportunities for Song Hong and Japan Vietnam

0.48

Correlation Coefficient

Song Hong  Japan Vietnam

Very weak diversification

The 3 months correlation between Song and Japan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Construction and Japan Vietnam Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Vietnam Medical 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 Japan Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Vietnam Medical has no effect on the direction of Song Hong i.e., Song Hong and Japan Vietnam go up and down completely randomly.

Pair Corralation between Song Hong and Japan Vietnam

Assuming the 90 days trading horizon Song Hong Construction is expected to generate 1.38 times more return on investment than Japan Vietnam. However, Song Hong is 1.38 times more volatile than Japan Vietnam Medical. It trades about 0.05 of its potential returns per unit of risk. Japan Vietnam Medical is currently generating about 0.03 per unit of risk. If you would invest  487,373  in Song Hong Construction on October 10, 2024 and sell it today you would earn a total of  302,627  from holding Song Hong Construction or generate 62.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.2%
Values	Daily Returns

Song Hong Construction  vs.  Japan Vietnam Medical

Song Hong Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Song Hong displayed solid returns over the last few months and may actually be approaching a breakup point.

Japan Vietnam Medical

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Song Hong and Japan Vietnam

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

The idea behind Song Hong Construction and Japan Vietnam Medical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.