Correlation Between Thu Duc and Song Hong

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

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

Diversification Opportunities for Thu Duc and Song Hong

0.02

Correlation Coefficient

Thu Duc  Song Hong

Significant diversification

The 3 months correlation between Thu and Song is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Thu Duc TradingImport and Song Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Construction and Thu Duc 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 Thu Duc TradingImport 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 Construction has no effect on the direction of Thu Duc i.e., Thu Duc and Song Hong go up and down completely randomly.

Pair Corralation between Thu Duc and Song Hong

Assuming the 90 days trading horizon Thu Duc TradingImport is expected to under-perform the Song Hong. But the stock apears to be less risky and, when comparing its historical volatility, Thu Duc TradingImport is 1.16 times less risky than Song Hong. The stock trades about -0.03 of its potential returns per unit of risk. The Song Hong Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  487,373  in Song Hong Construction on October 11, 2024 and sell it today you would earn a total of  302,627  from holding Song Hong Construction or generate 62.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.68%
Values	Daily Returns

Thu Duc TradingImport  vs.  Song Hong Construction

Thu Duc TradingImport

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Thu Duc TradingImport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating fundamental indicators, Thu Duc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Song Hong Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Song Hong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thu Duc and Song Hong

The main advantage of trading using opposite Thu Duc and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thu Duc 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 Thu Duc TradingImport and Song Hong Construction 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.