Correlation Between Sime Darby and Sanichi Technology
Can any of the company-specific risk be diversified away by investing in both Sime Darby and Sanichi Technology 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 Sime Darby and Sanichi Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sime Darby Plantation and Sanichi Technology Bhd, you can compare the effects of market volatilities on Sime Darby and Sanichi Technology 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 Sime Darby with a short position of Sanichi Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Sanichi Technology.
Diversification Opportunities for Sime Darby and Sanichi Technology
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sime and Sanichi is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Plantation and Sanichi Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanichi Technology Bhd and Sime Darby 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 Sime Darby Plantation are associated (or correlated) with Sanichi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanichi Technology Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Sanichi Technology go up and down completely randomly.
Pair Corralation between Sime Darby and Sanichi Technology
Assuming the 90 days trading horizon Sime Darby Plantation is expected to generate 0.25 times more return on investment than Sanichi Technology. However, Sime Darby Plantation is 4.0 times less risky than Sanichi Technology. It trades about -0.03 of its potential returns per unit of risk. Sanichi Technology Bhd is currently generating about -0.06 per unit of risk. If you would invest 496.00 in Sime Darby Plantation on October 15, 2024 and sell it today you would lose (4.00) from holding Sime Darby Plantation or give up 0.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sime Darby Plantation vs. Sanichi Technology Bhd
Performance |
| Timeline |
| Sime Darby Plantation |
| Sanichi Technology Bhd |
Sime Darby and Sanichi Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sime Darby and Sanichi Technology
The main advantage of trading using opposite Sime Darby and Sanichi Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sime Darby position performs unexpectedly, Sanichi Technology 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 Sanichi Technology will offset losses from the drop in Sanichi Technology's long position.| Sime Darby vs. Kluang Rubber | Sime Darby vs. Icon Offshore Bhd | Sime Darby vs. IHH Healthcare Bhd | Sime Darby vs. Impiana Hotels Bhd |
| Sanichi Technology vs. Malayan Banking Bhd | Sanichi Technology vs. Binasat Communications Bhd | Sanichi Technology vs. Lotte Chemical Titan | Sanichi Technology vs. Hong Leong Bank |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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