Correlation Between IDJ FINANCIAL and Song Hong

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

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

Diversification Opportunities for IDJ FINANCIAL and Song Hong

0.37

Correlation Coefficient

IDJ FINANCIAL  Song Hong

Weak diversification

The 3 months correlation between IDJ and Song is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding IDJ FINANCIAL and Song Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Construction and IDJ FINANCIAL 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 IDJ FINANCIAL 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 Construction has no effect on the direction of IDJ FINANCIAL i.e., IDJ FINANCIAL and Song Hong go up and down completely randomly.

Pair Corralation between IDJ FINANCIAL and Song Hong

Assuming the 90 days trading horizon IDJ FINANCIAL is expected to under-perform the Song Hong. But the stock apears to be less risky and, when comparing its historical volatility, IDJ FINANCIAL is 1.71 times less risky than Song Hong. The stock trades about -0.03 of its potential returns per unit of risk. The Song Hong Construction is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  728,684  in Song Hong Construction on September 15, 2024 and sell it today you would earn a total of  11,316  from holding Song Hong Construction or generate 1.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.85%
Values	Daily Returns

IDJ FINANCIAL  vs.  Song Hong Construction

IDJ FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDJ FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, IDJ FINANCIAL is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with IDJ FINANCIAL and Song Hong

The main advantage of trading using opposite IDJ FINANCIAL and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDJ FINANCIAL 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 IDJ FINANCIAL and Song Hong 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.