Correlation Between SIMMTECH and SS TECH

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

By analyzing existing cross correlation between SIMMTECH Co and SS TECH, you can compare the effects of market volatilities on SIMMTECH and SS TECH 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 SIMMTECH with a short position of SS TECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMMTECH and SS TECH.

Diversification Opportunities for SIMMTECH and SS TECH

0.88

Correlation Coefficient

SIMMTECH  SS TECH

Very poor diversification

The 3 months correlation between SIMMTECH and 101490 is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and SS TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SS TECH and SIMMTECH 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 SIMMTECH Co are associated (or correlated) with SS TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SS TECH has no effect on the direction of SIMMTECH i.e., SIMMTECH and SS TECH go up and down completely randomly.

Pair Corralation between SIMMTECH and SS TECH

Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the SS TECH. But the stock apears to be less risky and, when comparing its historical volatility, SIMMTECH Co is 1.05 times less risky than SS TECH. The stock trades about -0.35 of its potential returns per unit of risk. The SS TECH is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,445,000  in SS TECH on September 4, 2024 and sell it today you would lose (265,000) from holding SS TECH or give up 10.84% of portfolio value over 90 days.

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

SIMMTECH Co  vs.  SS TECH

SIMMTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMMTECH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SS TECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SS TECH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SIMMTECH and SS TECH

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

The idea behind SIMMTECH Co and SS TECH 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.