Correlation Between Song Hong and Thien Long

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

Diversification Opportunities for Song Hong and Thien Long

0.79

Correlation Coefficient

Song Hong  Thien Long

Poor diversification

The 3 months correlation between Song and Thien is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Garment and Thien Long Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thien Long Group 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 Thien Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thien Long Group has no effect on the direction of Song Hong i.e., Song Hong and Thien Long go up and down completely randomly.

Pair Corralation between Song Hong and Thien Long

Assuming the 90 days trading horizon Song Hong is expected to generate 28.15 times less return on investment than Thien Long. But when comparing it to its historical volatility, Song Hong Garment is 1.02 times less risky than Thien Long. It trades about 0.01 of its potential returns per unit of risk. Thien Long Group is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6,020,000  in Thien Long Group on September 19, 2024 and sell it today you would earn a total of  940,000  from holding Thien Long Group or generate 15.61% return on investment over 90 days.

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

Song Hong Garment  vs.  Thien Long Group

Song Hong Garment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 10 (%) 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.

Thien Long Group

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Song Hong and Thien Long

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

The idea behind Song Hong Garment and Thien Long Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.