Correlation Between Songwon Industrial and Chunbo

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

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

Diversification Opportunities for Songwon Industrial and Chunbo

0.5

Correlation Coefficient

Songwon Industrial  Chunbo

Very weak diversification

The 3 months correlation between Songwon and Chunbo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Songwon Industrial Co and Chunbo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunbo and Songwon Industrial 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 Songwon Industrial Co are associated (or correlated) with Chunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunbo has no effect on the direction of Songwon Industrial i.e., Songwon Industrial and Chunbo go up and down completely randomly.

Pair Corralation between Songwon Industrial and Chunbo

Assuming the 90 days trading horizon Songwon Industrial Co is expected to generate 0.92 times more return on investment than Chunbo. However, Songwon Industrial Co is 1.09 times less risky than Chunbo. It trades about -0.02 of its potential returns per unit of risk. Chunbo Co is currently generating about -0.15 per unit of risk. If you would invest  1,122,000  in Songwon Industrial Co on September 2, 2024 and sell it today you would lose (75,000) from holding Songwon Industrial Co or give up 6.68% of portfolio value over 90 days.

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

Songwon Industrial Co  vs.  Chunbo Co

Songwon Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Songwon Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Songwon Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chunbo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chunbo Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Songwon Industrial and Chunbo

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

The idea behind Songwon Industrial Co and Chunbo Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.