Correlation Between LDG Investment and Song Hong

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

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

Diversification Opportunities for LDG Investment and Song Hong

0.69

Correlation Coefficient

LDG Investment  Song Hong

Poor diversification

The 3 months correlation between LDG and Song is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LDG Investment JSC and Song Hong Garment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Garment and LDG Investment 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 LDG Investment JSC 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 Garment has no effect on the direction of LDG Investment i.e., LDG Investment and Song Hong go up and down completely randomly.

Pair Corralation between LDG Investment and Song Hong

Assuming the 90 days trading horizon LDG Investment JSC is expected to generate 1.05 times more return on investment than Song Hong. However, LDG Investment is 1.05 times more volatile than Song Hong Garment. It trades about 0.48 of its potential returns per unit of risk. Song Hong Garment is currently generating about 0.27 per unit of risk. If you would invest  180,000  in LDG Investment JSC on December 4, 2024 and sell it today you would earn a total of  50,000  from holding LDG Investment JSC or generate 27.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

LDG Investment JSC  vs.  Song Hong Garment

LDG Investment JSC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LDG Investment JSC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, LDG Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Song Hong Garment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Song Hong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LDG Investment and Song Hong

The main advantage of trading using opposite LDG Investment and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LDG Investment 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 LDG Investment JSC and Song Hong Garment 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..