Correlation Between Song Hong and Post

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

Diversification Opportunities for Song Hong and Post

0.85

Correlation Coefficient

Song Hong  Post

Very poor diversification

The 3 months correlation between Song and Post is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Aluminum and Post and Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post and Telecommuni 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 Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post and Telecommuni has no effect on the direction of Song Hong i.e., Song Hong and Post go up and down completely randomly.

Pair Corralation between Song Hong and Post

Assuming the 90 days trading horizon Song Hong is expected to generate 1.59 times less return on investment than Post. In addition to that, Song Hong is 1.35 times more volatile than Post and Telecommunications. It trades about 0.06 of its total potential returns per unit of risk. Post and Telecommunications is currently generating about 0.14 per unit of volatility. If you would invest  459,000  in Post and Telecommunications on December 27, 2024 and sell it today you would earn a total of  108,000  from holding Post and Telecommunications or generate 23.53% return on investment over 90 days.

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

Song Hong Aluminum  vs.  Post and Telecommunications

Song Hong Aluminum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Aluminum are ranked lower than 5 (%) 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.

Post and Telecommuni

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Post and Telecommunications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Post displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Song Hong and Post

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

The idea behind Song Hong Aluminum and Post and Telecommunications 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.