Correlation Between SIMMTECH and Dragonfly
Can any of the company-specific risk be diversified away by investing in both SIMMTECH and Dragonfly 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 SIMMTECH and Dragonfly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIMMTECH Co and Dragonfly GF Co, you can compare the effects of market volatilities on SIMMTECH and Dragonfly 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 SIMMTECH with a short position of Dragonfly. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMMTECH and Dragonfly.
Diversification Opportunities for SIMMTECH and Dragonfly
Poor diversification
The 3 months correlation between SIMMTECH and Dragonfly is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF and SIMMTECH 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 SIMMTECH Co are associated (or correlated) with Dragonfly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragonfly GF has no effect on the direction of SIMMTECH i.e., SIMMTECH and Dragonfly go up and down completely randomly.
Pair Corralation between SIMMTECH and Dragonfly
Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the Dragonfly. But the stock apears to be less risky and, when comparing its historical volatility, SIMMTECH Co is 45.14 times less risky than Dragonfly. The stock trades about -0.54 of its potential returns per unit of risk. The Dragonfly GF Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 123,500 in Dragonfly GF Co on August 31, 2024 and sell it today you would lose (7,000) from holding Dragonfly GF Co or give up 5.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 39.13% |
| Values | Daily Returns |
SIMMTECH Co vs. Dragonfly GF Co
Performance |
| Timeline |
| SIMMTECH |
| Dragonfly GF |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
SIMMTECH and Dragonfly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMMTECH and Dragonfly
The main advantage of trading using opposite SIMMTECH and Dragonfly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMMTECH position performs unexpectedly, Dragonfly 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 Dragonfly will offset losses from the drop in Dragonfly's long position.| SIMMTECH vs. Korean Air Lines | SIMMTECH vs. Daehan Steel | SIMMTECH vs. Hankook Steel Co | SIMMTECH vs. Jeju Air Co |
| Dragonfly vs. Samsung Electronics Co | Dragonfly vs. Samsung Electronics Co | Dragonfly vs. LG Energy Solution | Dragonfly vs. SK Hynix |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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