Correlation Between Promise Technology and Simple Mart
Can any of the company-specific risk be diversified away by investing in both Promise Technology and Simple Mart 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 Promise Technology and Simple Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promise Technology and Simple Mart Retail, you can compare the effects of market volatilities on Promise Technology and Simple Mart 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 Promise Technology with a short position of Simple Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promise Technology and Simple Mart.
Diversification Opportunities for Promise Technology and Simple Mart
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Promise and Simple is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Promise Technology and Simple Mart Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simple Mart Retail and Promise Technology 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 Promise Technology are associated (or correlated) with Simple Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simple Mart Retail has no effect on the direction of Promise Technology i.e., Promise Technology and Simple Mart go up and down completely randomly.
Pair Corralation between Promise Technology and Simple Mart
Assuming the 90 days trading horizon Promise Technology is expected to under-perform the Simple Mart. In addition to that, Promise Technology is 1.45 times more volatile than Simple Mart Retail. It trades about -0.3 of its total potential returns per unit of risk. Simple Mart Retail is currently generating about 0.07 per unit of volatility. If you would invest 4,120 in Simple Mart Retail on August 28, 2024 and sell it today you would earn a total of 50.00 from holding Simple Mart Retail or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Promise Technology vs. Simple Mart Retail
Performance |
| Timeline |
| Promise Technology |
| Simple Mart Retail |
Promise Technology and Simple Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promise Technology and Simple Mart
The main advantage of trading using opposite Promise Technology and Simple Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promise Technology position performs unexpectedly, Simple Mart 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 Simple Mart will offset losses from the drop in Simple Mart's long position.The idea behind Promise Technology and Simple Mart Retail 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.| Simple Mart vs. Taiwan Semiconductor Manufacturing | Simple Mart vs. Hon Hai Precision | Simple Mart vs. MediaTek | Simple Mart vs. Chunghwa Telecom Co |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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