Correlation Between SIMMTECH and High Tech

Can any of the company-specific risk be diversified away by investing in both SIMMTECH and High 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 High 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 High Tech Pharm, you can compare the effects of market volatilities on SIMMTECH and High 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 High Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMMTECH and High Tech.

Diversification Opportunities for SIMMTECH and High Tech

-0.34

Correlation Coefficient

SIMMTECH  High Tech

Very good diversification

The 3 months correlation between SIMMTECH and High is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and High Tech Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Tech Pharm 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 High Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Tech Pharm has no effect on the direction of SIMMTECH i.e., SIMMTECH and High Tech go up and down completely randomly.

Pair Corralation between SIMMTECH and High Tech

Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the High Tech. In addition to that, SIMMTECH is 1.13 times more volatile than High Tech Pharm. It trades about -0.36 of its total potential returns per unit of risk. High Tech Pharm is currently generating about -0.04 per unit of volatility. If you would invest  1,525,000  in High Tech Pharm on September 3, 2024 and sell it today you would lose (122,000) from holding High Tech Pharm or give up 8.0% of portfolio value over 90 days.

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

SIMMTECH Co  vs.  High Tech Pharm

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.

High Tech Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Tech Pharm 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 High Tech

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

The idea behind SIMMTECH Co and High Tech Pharm 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.