Correlation Between Sime Darby and BAIC MotorLimited
Can any of the company-specific risk be diversified away by investing in both Sime Darby and BAIC MotorLimited 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 BAIC MotorLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sime Darby Bhd and BAIC Motor, you can compare the effects of market volatilities on Sime Darby and BAIC MotorLimited 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 BAIC MotorLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and BAIC MotorLimited.
Diversification Opportunities for Sime Darby and BAIC MotorLimited
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sime and BAIC is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and BAIC Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIC MotorLimited 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 Bhd are associated (or correlated) with BAIC MotorLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIC MotorLimited has no effect on the direction of Sime Darby i.e., Sime Darby and BAIC MotorLimited go up and down completely randomly.
Pair Corralation between Sime Darby and BAIC MotorLimited
Assuming the 90 days horizon Sime Darby Bhd is expected to generate 0.93 times more return on investment than BAIC MotorLimited. However, Sime Darby Bhd is 1.08 times less risky than BAIC MotorLimited. It trades about 0.08 of its potential returns per unit of risk. BAIC Motor is currently generating about 0.04 per unit of risk. If you would invest 30.00 in Sime Darby Bhd on August 31, 2024 and sell it today you would earn a total of 21.00 from holding Sime Darby Bhd or generate 70.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 59.12% |
Values | Daily Returns |
Sime Darby Bhd vs. BAIC Motor
Performance |
Timeline |
Sime Darby Bhd |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
BAIC MotorLimited |
Sime Darby and BAIC MotorLimited Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sime Darby and BAIC MotorLimited
The main advantage of trading using opposite Sime Darby and BAIC MotorLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sime Darby position performs unexpectedly, BAIC MotorLimited 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 BAIC MotorLimited will offset losses from the drop in BAIC MotorLimited's long position.Sime Darby vs. Zapp Electric Vehicles | Sime Darby vs. First Hydrogen Corp | Sime Darby vs. Guangzhou Automobile Group | Sime Darby vs. Phoenix Motor Common |
BAIC MotorLimited vs. Zapp Electric Vehicles | BAIC MotorLimited vs. First Hydrogen Corp | BAIC MotorLimited vs. Guangzhou Automobile Group | BAIC MotorLimited vs. Phoenix Motor Common |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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