Correlation Between Magni Tech and Sime Darby

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

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

Diversification Opportunities for Magni Tech and Sime Darby

0.49

Correlation Coefficient

Magni Tech  Sime Darby

Very weak diversification

The 3 months correlation between Magni and Sime is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Magni Tech Industries and Sime Darby Plantation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Plantation and Magni Tech 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 Magni Tech Industries are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Plantation has no effect on the direction of Magni Tech i.e., Magni Tech and Sime Darby go up and down completely randomly.

Pair Corralation between Magni Tech and Sime Darby

Assuming the 90 days trading horizon Magni Tech Industries is expected to generate 0.9 times more return on investment than Sime Darby. However, Magni Tech Industries is 1.11 times less risky than Sime Darby. It trades about 0.52 of its potential returns per unit of risk. Sime Darby Plantation is currently generating about 0.08 per unit of risk. If you would invest  249.00  in Magni Tech Industries on September 15, 2024 and sell it today you would earn a total of  37.00  from holding Magni Tech Industries or generate 14.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Magni Tech Industries  vs.  Sime Darby Plantation

Magni Tech Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magni Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Magni Tech and Sime Darby

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

The idea behind Magni Tech Industries and Sime Darby Plantation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.