Correlation Between Simple Mart and Sun Max

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

By analyzing existing cross correlation between Simple Mart Retail and Sun Max Tech, you can compare the effects of market volatilities on Simple Mart and Sun Max 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 Simple Mart with a short position of Sun Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and Sun Max.

Diversification Opportunities for Simple Mart and Sun Max

-0.06

Correlation Coefficient

Simple Mart  Sun Max

Good diversification

The 3 months correlation between Simple and Sun is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and Sun Max Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Max Tech and Simple Mart 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 Simple Mart Retail are associated (or correlated) with Sun Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Max Tech has no effect on the direction of Simple Mart i.e., Simple Mart and Sun Max go up and down completely randomly.

Pair Corralation between Simple Mart and Sun Max

Assuming the 90 days trading horizon Simple Mart Retail is expected to under-perform the Sun Max. But the stock apears to be less risky and, when comparing its historical volatility, Simple Mart Retail is 2.63 times less risky than Sun Max. The stock trades about -0.07 of its potential returns per unit of risk. The Sun Max Tech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,970  in Sun Max Tech on October 1, 2024 and sell it today you would earn a total of  300.00  from holding Sun Max Tech or generate 6.04% return on investment over 90 days.

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

Simple Mart Retail  vs.  Sun Max Tech

Simple Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simple Mart Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Simple Mart is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sun Max Tech

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Max Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sun Max may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simple Mart and Sun Max

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

The idea behind Simple Mart Retail and Sun Max 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.