Correlation Between Song Hong and Transimex Transportation

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

Diversification Opportunities for Song Hong and Transimex Transportation

-0.5

Correlation Coefficient

Song Hong  Transimex Transportation

Very good diversification

The 3 months correlation between Song and Transimex is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Garment and Transimex Transportation JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transimex Transportation 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 Transimex Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transimex Transportation has no effect on the direction of Song Hong i.e., Song Hong and Transimex Transportation go up and down completely randomly.

Pair Corralation between Song Hong and Transimex Transportation

Assuming the 90 days trading horizon Song Hong Garment is expected to generate 0.83 times more return on investment than Transimex Transportation. However, Song Hong Garment is 1.21 times less risky than Transimex Transportation. It trades about 0.08 of its potential returns per unit of risk. Transimex Transportation JSC is currently generating about 0.04 per unit of risk. If you would invest  3,062,201  in Song Hong Garment on September 12, 2024 and sell it today you would earn a total of  1,927,799  from holding Song Hong Garment or generate 62.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.29%
Values	Daily Returns

Song Hong Garment  vs.  Transimex Transportation JSC

Song Hong Garment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Song Hong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transimex Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transimex Transportation JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Song Hong and Transimex Transportation

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

The idea behind Song Hong Garment and Transimex Transportation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.