Correlation Between Simplo Technology and Newretail

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

By analyzing existing cross correlation between Simplo Technology Co and Newretail Co, you can compare the effects of market volatilities on Simplo Technology and Newretail 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 Simplo Technology with a short position of Newretail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplo Technology and Newretail.

Diversification Opportunities for Simplo Technology and Newretail

0.7

Correlation Coefficient

Simplo Technology  Newretail

Poor diversification

The 3 months correlation between Simplo and Newretail is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Simplo Technology Co and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and Simplo Technology 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 Simplo Technology Co are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Simplo Technology i.e., Simplo Technology and Newretail go up and down completely randomly.

Pair Corralation between Simplo Technology and Newretail

Assuming the 90 days trading horizon Simplo Technology is expected to generate 1.88 times less return on investment than Newretail. But when comparing it to its historical volatility, Simplo Technology Co is 1.44 times less risky than Newretail. It trades about 0.05 of its potential returns per unit of risk. Newretail Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,145  in Newretail Co on September 22, 2024 and sell it today you would earn a total of  255.00  from holding Newretail Co or generate 11.89% return on investment over 90 days.

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

Simplo Technology Co  vs.  Newretail Co

Simplo Technology

Risk-Adjusted Performance

4 of 100

Insignificant

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

Newretail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplo Technology and Newretail

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

The idea behind Simplo Technology Co and Newretail Co 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.