Correlation Between Song Hong and Picomat Plastic

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

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

Diversification Opportunities for Song Hong and Picomat Plastic

0.77

Correlation Coefficient

Song Hong  Picomat Plastic

Poor diversification

The 3 months correlation between Song and Picomat is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Aluminum and Picomat Plastic JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Picomat Plastic 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 Aluminum are associated (or correlated) with Picomat Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Picomat Plastic JSC has no effect on the direction of Song Hong i.e., Song Hong and Picomat Plastic go up and down completely randomly.

Pair Corralation between Song Hong and Picomat Plastic

Assuming the 90 days trading horizon Song Hong Aluminum is expected to generate 2.33 times more return on investment than Picomat Plastic. However, Song Hong is 2.33 times more volatile than Picomat Plastic JSC. It trades about 0.08 of its potential returns per unit of risk. Picomat Plastic JSC is currently generating about 0.1 per unit of risk. If you would invest  440,000  in Song Hong Aluminum on December 21, 2024 and sell it today you would earn a total of  70,000  from holding Song Hong Aluminum or generate 15.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Song Hong Aluminum  vs.  Picomat Plastic JSC

Song Hong Aluminum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Aluminum are ranked lower than 6 (%) 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.

Picomat Plastic JSC

Risk-Adjusted Performance

OK

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

Pair Trading with Song Hong and Picomat Plastic

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

The idea behind Song Hong Aluminum and Picomat Plastic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..