Correlation Between SIMMTECH and Hana Materials

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

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

Diversification Opportunities for SIMMTECH and Hana Materials

0.98

Correlation Coefficient

SIMMTECH  Hana Materials

Almost no diversification

The 3 months correlation between SIMMTECH and Hana is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and Hana Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Materials 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 Hana Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Materials has no effect on the direction of SIMMTECH i.e., SIMMTECH and Hana Materials go up and down completely randomly.

Pair Corralation between SIMMTECH and Hana Materials

Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the Hana Materials. In addition to that, SIMMTECH is 1.08 times more volatile than Hana Materials. It trades about -0.31 of its total potential returns per unit of risk. Hana Materials is currently generating about -0.17 per unit of volatility. If you would invest  3,025,000  in Hana Materials on September 12, 2024 and sell it today you would lose (755,000) from holding Hana Materials or give up 24.96% of portfolio value over 90 days.

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

SIMMTECH Co  vs.  Hana Materials

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.

Hana Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Materials 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.

Pair Trading with SIMMTECH and Hana Materials

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

The idea behind SIMMTECH Co and Hana Materials 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.