Correlation Between Din Capital and Song Hong

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

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

Diversification Opportunities for Din Capital and Song Hong

0.7

Correlation Coefficient

Din Capital  Song Hong

Poor diversification

The 3 months correlation between Din and Song is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Din Capital Investment and Song Hong Garment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Hong Garment and Din Capital 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 Din Capital Investment 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 Garment has no effect on the direction of Din Capital i.e., Din Capital and Song Hong go up and down completely randomly.

Pair Corralation between Din Capital and Song Hong

Assuming the 90 days trading horizon Din Capital is expected to generate 1.13 times less return on investment than Song Hong. In addition to that, Din Capital is 1.03 times more volatile than Song Hong Garment. It trades about 0.1 of its total potential returns per unit of risk. Song Hong Garment is currently generating about 0.11 per unit of volatility. If you would invest  4,448,539  in Song Hong Garment on September 12, 2024 and sell it today you would earn a total of  541,461  from holding Song Hong Garment or generate 12.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.19%
Values	Daily Returns

Din Capital Investment  vs.  Song Hong Garment

Din Capital Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Din Capital Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Din Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Song Hong Garment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Garment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Song Hong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Din Capital and Song Hong

The main advantage of trading using opposite Din Capital and Song Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Din Capital 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 Din Capital Investment and Song Hong Garment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.