Correlation Between Song Hong and Danang Port

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

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

Diversification Opportunities for Song Hong and Danang Port

0.51

Correlation Coefficient

Song Hong  Danang Port

Very weak diversification

The 3 months correlation between Song and Danang is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Garment and Danang Port JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Port JSC 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 Garment are associated (or correlated) with Danang Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Port JSC has no effect on the direction of Song Hong i.e., Song Hong and Danang Port go up and down completely randomly.

Pair Corralation between Song Hong and Danang Port

Assuming the 90 days trading horizon Song Hong is expected to generate 1.01 times less return on investment than Danang Port. But when comparing it to its historical volatility, Song Hong Garment is 1.23 times less risky than Danang Port. It trades about 0.2 of its potential returns per unit of risk. Danang Port JSC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,050,000  in Danang Port JSC on December 3, 2024 and sell it today you would earn a total of  690,000  from holding Danang Port JSC or generate 22.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Song Hong Garment  vs.  Danang Port JSC

Song Hong Garment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 15 (%) 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.

Danang Port JSC

Risk-Adjusted Performance

Good

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

Pair Trading with Song Hong and Danang Port

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

The idea behind Song Hong Garment and Danang Port JSC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.