Correlation Between CU Tech and SIMMTECH
Can any of the company-specific risk be diversified away by investing in both CU Tech and SIMMTECH 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 CU Tech and SIMMTECH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CU Tech Corp and SIMMTECH Co, you can compare the effects of market volatilities on CU Tech and SIMMTECH 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 CU Tech with a short position of SIMMTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of CU Tech and SIMMTECH.
Diversification Opportunities for CU Tech and SIMMTECH
Very poor diversification
The 3 months correlation between 376290 and SIMMTECH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CU Tech Corp and SIMMTECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMMTECH and CU Tech 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 CU Tech Corp are associated (or correlated) with SIMMTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMMTECH has no effect on the direction of CU Tech i.e., CU Tech and SIMMTECH go up and down completely randomly.
Pair Corralation between CU Tech and SIMMTECH
Assuming the 90 days trading horizon CU Tech Corp is expected to generate 0.49 times more return on investment than SIMMTECH. However, CU Tech Corp is 2.04 times less risky than SIMMTECH. It trades about -0.08 of its potential returns per unit of risk. SIMMTECH Co is currently generating about -0.6 per unit of risk. If you would invest 306,500 in CU Tech Corp on September 1, 2024 and sell it today you would lose (8,000) from holding CU Tech Corp or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
CU Tech Corp vs. SIMMTECH Co
Performance |
| Timeline |
| CU Tech Corp |
| SIMMTECH |
CU Tech and SIMMTECH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CU Tech and SIMMTECH
The main advantage of trading using opposite CU Tech and SIMMTECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CU Tech position performs unexpectedly, SIMMTECH 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 SIMMTECH will offset losses from the drop in SIMMTECH's long position.| CU Tech vs. Daejoo Electronic Materials | CU Tech vs. Kbi Metal Co | CU Tech vs. Daiyang Metal Co | CU Tech vs. Hyundai Engineering Plastics |
| SIMMTECH vs. Iljin Materials Co | SIMMTECH vs. Daishin Information Communications | SIMMTECH vs. LS Materials | SIMMTECH vs. Daou Data 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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