Correlation Between Tin Nghia and Song Hong

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

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

Diversification Opportunities for Tin Nghia and Song Hong

-0.07

Correlation Coefficient

Tin Nghia  Song Hong

Good diversification

The 3 months correlation between Tin and Song is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tin Nghia Industrial 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 Tin Nghia 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 Tin Nghia Industrial 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 Tin Nghia i.e., Tin Nghia and Song Hong go up and down completely randomly.

Pair Corralation between Tin Nghia and Song Hong

Assuming the 90 days trading horizon Tin Nghia Industrial is expected to generate 0.74 times more return on investment than Song Hong. However, Tin Nghia Industrial is 1.36 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 -0.05 per unit of risk. If you would invest  2,150,000  in Tin Nghia Industrial on October 23, 2024 and sell it today you would lose (75,000) from holding Tin Nghia Industrial or give up 3.49% of portfolio value over 90 days.

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

Tin Nghia Industrial  vs.  Song Hong Aluminum

Tin Nghia Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tin Nghia Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tin Nghia 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 Tin Nghia and Song Hong

The main advantage of trading using opposite Tin Nghia and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tin Nghia 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 Tin Nghia Industrial 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.