Correlation Between SIMMTECH and CU Tech

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

Diversification Opportunities for SIMMTECH and CU Tech

0.85

Correlation Coefficient

SIMMTECH  CU Tech

Very poor diversification

The 3 months correlation between SIMMTECH and 376290 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and CU Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CU Tech Corp 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 CU Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CU Tech Corp has no effect on the direction of SIMMTECH i.e., SIMMTECH and CU Tech go up and down completely randomly.

Pair Corralation between SIMMTECH and CU Tech

Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the CU Tech. In addition to that, SIMMTECH is 2.14 times more volatile than CU Tech Corp. It trades about -0.36 of its total potential returns per unit of risk. CU Tech Corp is currently generating about -0.07 per unit of volatility. If you would invest  318,500  in CU Tech Corp on September 3, 2024 and sell it today you would lose (19,500) from holding CU Tech Corp or give up 6.12% 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.  CU Tech Corp

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.

CU Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CU Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CU Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SIMMTECH and CU Tech

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

The idea behind SIMMTECH Co and CU Tech Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.