Correlation Between Sime Darby and Inix Technologies

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

By analyzing existing cross correlation between Sime Darby Plantation and Inix Technologies Holdings, you can compare the effects of market volatilities on Sime Darby and Inix Technologies 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 Sime Darby with a short position of Inix Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Inix Technologies.

Diversification Opportunities for Sime Darby and Inix Technologies

-0.47

Correlation Coefficient

Sime Darby  Inix Technologies

Very good diversification

The 3 months correlation between Sime and Inix is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Plantation and Inix Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inix Technologies and Sime Darby 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 Sime Darby Plantation are associated (or correlated) with Inix Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inix Technologies has no effect on the direction of Sime Darby i.e., Sime Darby and Inix Technologies go up and down completely randomly.

Pair Corralation between Sime Darby and Inix Technologies

Assuming the 90 days trading horizon Sime Darby is expected to generate 16.03 times less return on investment than Inix Technologies. But when comparing it to its historical volatility, Sime Darby Plantation is 17.76 times less risky than Inix Technologies. It trades about 0.08 of its potential returns per unit of risk. Inix Technologies Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Inix Technologies Holdings on September 16, 2024 and sell it today you would lose (1.00) from holding Inix Technologies Holdings or give up 66.67% of portfolio value over 90 days.

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

Sime Darby Plantation  vs.  Inix Technologies Holdings

Sime Darby Plantation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sime Darby Plantation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sime Darby may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Inix Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inix Technologies Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Inix Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sime Darby and Inix Technologies

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

The idea behind Sime Darby Plantation and Inix Technologies Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.