Correlation Between Song Hong and POST TELECOMMU

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

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

Diversification Opportunities for Song Hong and POST TELECOMMU

0.21

Correlation Coefficient

Song Hong  POST TELECOMMU

Modest diversification

The 3 months correlation between Song and POST is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Construction and POST TELECOMMU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POST TELECOMMU and Song Hong 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 Song Hong Construction are associated (or correlated) with POST TELECOMMU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POST TELECOMMU has no effect on the direction of Song Hong i.e., Song Hong and POST TELECOMMU go up and down completely randomly.

Pair Corralation between Song Hong and POST TELECOMMU

Assuming the 90 days trading horizon Song Hong Construction is expected to generate 1.16 times more return on investment than POST TELECOMMU. However, Song Hong is 1.16 times more volatile than POST TELECOMMU. It trades about 0.04 of its potential returns per unit of risk. POST TELECOMMU is currently generating about 0.04 per unit of risk. If you would invest  728,684  in Song Hong Construction on September 18, 2024 and sell it today you would earn a total of  31,316  from holding Song Hong Construction or generate 4.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

Song Hong Construction  vs.  POST TELECOMMU

Song Hong Construction

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Song Hong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

POST TELECOMMU

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in POST TELECOMMU are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, POST TELECOMMU may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Song Hong and POST TELECOMMU

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

The idea behind Song Hong Construction and POST TELECOMMU 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.