Correlation Between Tien Giang and Song Hong

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

By analyzing existing cross correlation between Tien Giang Investment and Song Hong Aluminum, you can compare the effects of market volatilities on Tien Giang and Song Hong 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 Tien Giang with a short position of Song Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tien Giang and Song Hong.

Diversification Opportunities for Tien Giang and Song Hong

0.6

Correlation Coefficient

Tien Giang  Song Hong

Poor diversification

The 3 months correlation between Tien and Song is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tien Giang Investment and Song Hong Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Aluminum and Tien Giang 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 Tien Giang Investment are associated (or correlated) with Song Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Song Hong Aluminum has no effect on the direction of Tien Giang i.e., Tien Giang and Song Hong go up and down completely randomly.

Pair Corralation between Tien Giang and Song Hong

Assuming the 90 days trading horizon Tien Giang Investment is expected to generate 0.29 times more return on investment than Song Hong. However, Tien Giang Investment is 3.5 times less risky than Song Hong. It trades about 0.03 of its potential returns per unit of risk. Song Hong Aluminum is currently generating about -0.09 per unit of risk. If you would invest  4,396,209  in Tien Giang Investment on September 15, 2024 and sell it today you would earn a total of  53,791  from holding Tien Giang Investment or generate 1.22% return on investment over 90 days.

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

Tien Giang Investment  vs.  Song Hong Aluminum

Tien Giang Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tien Giang Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Tien Giang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Song Hong Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Song Hong Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical 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 Tien Giang and Song Hong

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

The idea behind Tien Giang Investment and Song Hong Aluminum 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.