Correlation Between Simple Mart and Century Wind
Can any of the company-specific risk be diversified away by investing in both Simple Mart and Century Wind 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 Simple Mart and Century Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simple Mart Retail and Century Wind Power, you can compare the effects of market volatilities on Simple Mart and Century Wind 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 Simple Mart with a short position of Century Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and Century Wind.
Diversification Opportunities for Simple Mart and Century Wind
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Simple and Century is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and Century Wind Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Wind Power and Simple Mart 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 Simple Mart Retail are associated (or correlated) with Century Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Wind Power has no effect on the direction of Simple Mart i.e., Simple Mart and Century Wind go up and down completely randomly.
Pair Corralation between Simple Mart and Century Wind
Assuming the 90 days trading horizon Simple Mart Retail is expected to under-perform the Century Wind. But the stock apears to be less risky and, when comparing its historical volatility, Simple Mart Retail is 2.14 times less risky than Century Wind. The stock trades about -0.01 of its potential returns per unit of risk. The Century Wind Power is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 27,107 in Century Wind Power on September 4, 2024 and sell it today you would earn a total of 2,993 from holding Century Wind Power or generate 11.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simple Mart Retail vs. Century Wind Power
Performance |
| Timeline |
| Simple Mart Retail |
| Century Wind Power |
Simple Mart and Century Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simple Mart and Century Wind
The main advantage of trading using opposite Simple Mart and Century Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simple Mart position performs unexpectedly, Century Wind 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 Century Wind will offset losses from the drop in Century Wind's long position.| Simple Mart vs. Taiwan Semiconductor Manufacturing | Simple Mart vs. Hon Hai Precision | Simple Mart vs. MediaTek | Simple Mart vs. Chunghwa Telecom Co |
| Century Wind vs. Cleanaway Co | Century Wind vs. Simple Mart Retail | Century Wind vs. WINSON Machinery Co | Century Wind vs. ReaLy Development Construction |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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