Correlation Between SMC Corp and JE Cleantech

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

By analyzing existing cross correlation between SMC Corp and JE Cleantech Holdings, you can compare the effects of market volatilities on SMC Corp and JE Cleantech 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 SMC Corp with a short position of JE Cleantech. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and JE Cleantech.

Diversification Opportunities for SMC Corp and JE Cleantech

-0.2

Correlation Coefficient

SMC Corp  JE Cleantech

Good diversification

The 3 months correlation between SMC and JCSE is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp and JE Cleantech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JE Cleantech Holdings and SMC Corp 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 SMC Corp are associated (or correlated) with JE Cleantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JE Cleantech Holdings has no effect on the direction of SMC Corp i.e., SMC Corp and JE Cleantech go up and down completely randomly.

Pair Corralation between SMC Corp and JE Cleantech

Assuming the 90 days horizon SMC Corp is expected to generate 15.81 times less return on investment than JE Cleantech. But when comparing it to its historical volatility, SMC Corp is 4.56 times less risky than JE Cleantech. It trades about 0.01 of its potential returns per unit of risk. JE Cleantech Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  219.00  in JE Cleantech Holdings on September 24, 2024 and sell it today you would lose (78.00) from holding JE Cleantech Holdings or give up 35.62% of portfolio value over 90 days.

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

SMC Corp  vs.  JE Cleantech Holdings

SMC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

JE Cleantech Holdings

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with SMC Corp and JE Cleantech

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

The idea behind SMC Corp and JE Cleantech 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.

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 CEOs Directory module to screen CEOs from public companies around the world.