Correlation Between Chung Hung and Song Ho

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

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

Diversification Opportunities for Chung Hung and Song Ho

0.27

Correlation Coefficient

Chung Hung  Song Ho

Modest diversification

The 3 months correlation between Chung and Song is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Song Ho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Ho Industrial and Chung Hung 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 Chung Hung Steel are associated (or correlated) with Song Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Song Ho Industrial has no effect on the direction of Chung Hung i.e., Chung Hung and Song Ho go up and down completely randomly.

Pair Corralation between Chung Hung and Song Ho

Assuming the 90 days trading horizon Chung Hung Steel is expected to under-perform the Song Ho. In addition to that, Chung Hung is 2.35 times more volatile than Song Ho Industrial. It trades about -0.03 of its total potential returns per unit of risk. Song Ho Industrial is currently generating about 0.0 per unit of volatility. If you would invest  2,840  in Song Ho Industrial on September 26, 2024 and sell it today you would lose (75.00) from holding Song Ho Industrial or give up 2.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Chung Hung Steel  vs.  Song Ho Industrial

Chung Hung Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hung Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hung is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Song Ho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Song Ho Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Song Ho is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chung Hung and Song Ho

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

The idea behind Chung Hung Steel and Song Ho Industrial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.