Correlation Between Simple Mart and Allied Industrial
Can any of the company-specific risk be diversified away by investing in both Simple Mart and Allied Industrial 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 Allied Industrial 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 Allied Industrial, you can compare the effects of market volatilities on Simple Mart and Allied Industrial 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 Allied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and Allied Industrial.
Diversification Opportunities for Simple Mart and Allied Industrial
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Simple and Allied is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and Allied Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Industrial 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 Allied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Industrial has no effect on the direction of Simple Mart i.e., Simple Mart and Allied Industrial go up and down completely randomly.
Pair Corralation between Simple Mart and Allied Industrial
Assuming the 90 days trading horizon Simple Mart is expected to generate 3.11 times less return on investment than Allied Industrial. But when comparing it to its historical volatility, Simple Mart Retail is 1.04 times less risky than Allied Industrial. It trades about 0.03 of its potential returns per unit of risk. Allied Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,260 in Allied Industrial on September 3, 2024 and sell it today you would earn a total of 10.00 from holding Allied Industrial or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simple Mart Retail vs. Allied Industrial
Performance |
| Timeline |
| Simple Mart Retail |
| Allied Industrial |
Simple Mart and Allied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simple Mart and Allied Industrial
The main advantage of trading using opposite Simple Mart and Allied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simple Mart position performs unexpectedly, Allied Industrial 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 Allied Industrial will offset losses from the drop in Allied Industrial'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 |
| Allied Industrial vs. Delta Electronics | Allied Industrial vs. China Steel Chemical | Allied Industrial vs. WiseChip Semiconductor | Allied Industrial vs. Novatek Microelectronics Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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