Correlation Between Simat Technologies and Power Solution

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

By analyzing existing cross correlation between Simat Technologies Public and Power Solution Technologies, you can compare the effects of market volatilities on Simat Technologies and Power Solution 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 Simat Technologies with a short position of Power Solution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simat Technologies and Power Solution.

Diversification Opportunities for Simat Technologies and Power Solution

-0.21

Correlation Coefficient

Simat Technologies  Power Solution

Very good diversification

The 3 months correlation between Simat and Power is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Simat Technologies Public and Power Solution Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solution Techn and Simat Technologies 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 Simat Technologies Public are associated (or correlated) with Power Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solution Techn has no effect on the direction of Simat Technologies i.e., Simat Technologies and Power Solution go up and down completely randomly.

Pair Corralation between Simat Technologies and Power Solution

Assuming the 90 days trading horizon Simat Technologies Public is expected to under-perform the Power Solution. In addition to that, Simat Technologies is 1.56 times more volatile than Power Solution Technologies. It trades about -0.2 of its total potential returns per unit of risk. Power Solution Technologies is currently generating about -0.18 per unit of volatility. If you would invest  47.00  in Power Solution Technologies on September 12, 2024 and sell it today you would lose (6.00) from holding Power Solution Technologies or give up 12.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Simat Technologies Public  vs.  Power Solution Technologies

Simat Technologies Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simat Technologies Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Simat Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Power Solution Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solution Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Simat Technologies and Power Solution

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

The idea behind Simat Technologies Public and Power Solution Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.