Correlation Between Song Hong and Hanoi Beer

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

Diversification Opportunities for Song Hong and Hanoi Beer

-0.24

Correlation Coefficient

Song Hong  Hanoi Beer

Very good diversification

The 3 months correlation between Song and Hanoi is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Garment and Hanoi Beer Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanoi Beer Trading 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 Hanoi Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanoi Beer Trading has no effect on the direction of Song Hong i.e., Song Hong and Hanoi Beer go up and down completely randomly.

Pair Corralation between Song Hong and Hanoi Beer

Assuming the 90 days trading horizon Song Hong is expected to generate 1.86 times less return on investment than Hanoi Beer. But when comparing it to its historical volatility, Song Hong Garment is 1.89 times less risky than Hanoi Beer. It trades about 0.12 of its potential returns per unit of risk. Hanoi Beer Trading is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,190,000  in Hanoi Beer Trading on December 28, 2024 and sell it today you would earn a total of  730,000  from holding Hanoi Beer Trading or generate 17.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.88%
Values	Daily Returns

Song Hong Garment  vs.  Hanoi Beer Trading

Song Hong Garment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 9 (%) 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.

Hanoi Beer Trading

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanoi Beer Trading are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hanoi Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Song Hong and Hanoi Beer

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

The idea behind Song Hong Garment and Hanoi Beer Trading 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.