Correlation Between SoundHound and China Overseas

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

By analyzing existing cross correlation between SoundHound AI and China Overseas Land, you can compare the effects of market volatilities on SoundHound and China Overseas 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 SoundHound with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and China Overseas.

Diversification Opportunities for SoundHound and China Overseas

-0.04

Correlation Coefficient

SoundHound  China Overseas

Good diversification

The 3 months correlation between SoundHound and China is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and SoundHound 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 SoundHound AI are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of SoundHound i.e., SoundHound and China Overseas go up and down completely randomly.

Pair Corralation between SoundHound and China Overseas

Given the investment horizon of 90 days SoundHound AI is expected to generate 3.68 times more return on investment than China Overseas. However, SoundHound is 3.68 times more volatile than China Overseas Land. It trades about 0.31 of its potential returns per unit of risk. China Overseas Land is currently generating about -0.04 per unit of risk. If you would invest  777.00  in SoundHound AI on September 12, 2024 and sell it today you would earn a total of  645.50  from holding SoundHound AI or generate 83.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

SoundHound AI  vs.  China Overseas Land

SoundHound AI

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoundHound and China Overseas

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

The idea behind SoundHound AI and China Overseas Land 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.