Correlation Between ES Ceramics and Sime Darby

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

By analyzing existing cross correlation between ES Ceramics Technology and Sime Darby Plantation, you can compare the effects of market volatilities on ES Ceramics and Sime Darby 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 ES Ceramics with a short position of Sime Darby. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and Sime Darby.

Diversification Opportunities for ES Ceramics and Sime Darby

0.15

Correlation Coefficient

ES Ceramics  Sime Darby

Average diversification

The 3 months correlation between 0100 and Sime is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and Sime Darby Plantation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Plantation and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Plantation has no effect on the direction of ES Ceramics i.e., ES Ceramics and Sime Darby go up and down completely randomly.

Pair Corralation between ES Ceramics and Sime Darby

Assuming the 90 days trading horizon ES Ceramics is expected to generate 2.17 times less return on investment than Sime Darby. In addition to that, ES Ceramics is 2.12 times more volatile than Sime Darby Plantation. It trades about 0.02 of its total potential returns per unit of risk. Sime Darby Plantation is currently generating about 0.08 per unit of volatility. If you would invest  456.00  in Sime Darby Plantation on September 16, 2024 and sell it today you would earn a total of  40.00  from holding Sime Darby Plantation or generate 8.77% return on investment over 90 days.

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

ES Ceramics Technology  vs.  Sime Darby Plantation

ES Ceramics Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, ES Ceramics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sime Darby Plantation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sime Darby Plantation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sime Darby may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ES Ceramics and Sime Darby

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

The idea behind ES Ceramics Technology and Sime Darby Plantation 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.