Correlation Between Sime Darby and Phoenix

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

By analyzing existing cross correlation between Sime Darby Bhd and Phoenix Motor Common, you can compare the effects of market volatilities on Sime Darby and Phoenix 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 Phoenix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Phoenix.

Diversification Opportunities for Sime Darby and Phoenix

-0.05

Correlation Coefficient

Sime Darby  Phoenix

Good diversification

The 3 months correlation between Sime and Phoenix is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Phoenix Motor Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Motor Common 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 Bhd are associated (or correlated) with Phoenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Motor Common has no effect on the direction of Sime Darby i.e., Sime Darby and Phoenix go up and down completely randomly.

Pair Corralation between Sime Darby and Phoenix

If you would invest  45.00  in Phoenix Motor Common on September 15, 2024 and sell it today you would lose (14.00) from holding Phoenix Motor Common or give up 31.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Sime Darby Bhd  vs.  Phoenix Motor Common

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Sime Darby is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Phoenix Motor Common

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Motor Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Phoenix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sime Darby and Phoenix

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

The idea behind Sime Darby Bhd and Phoenix Motor Common 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.