Correlation Between DC HEALTHCARE and Sime Darby

Can any of the company-specific risk be diversified away by investing in both DC HEALTHCARE and Sime Darby 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 DC HEALTHCARE and Sime Darby into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DC HEALTHCARE HOLDINGS and Sime Darby Bhd, you can compare the effects of market volatilities on DC HEALTHCARE and Sime Darby 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 DC HEALTHCARE with a short position of Sime Darby. Check out your portfolio center. Please also check ongoing floating volatility patterns of DC HEALTHCARE and Sime Darby.

Diversification Opportunities for DC HEALTHCARE and Sime Darby

0.52

Correlation Coefficient

DC HEALTHCARE  Sime Darby

Very weak diversification

The 3 months correlation between 0283 and Sime is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding DC HEALTHCARE HOLDINGS and Sime Darby Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Bhd and DC HEALTHCARE 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 DC HEALTHCARE HOLDINGS are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Bhd has no effect on the direction of DC HEALTHCARE i.e., DC HEALTHCARE and Sime Darby go up and down completely randomly.

Pair Corralation between DC HEALTHCARE and Sime Darby

Assuming the 90 days trading horizon DC HEALTHCARE HOLDINGS is expected to generate 2.82 times more return on investment than Sime Darby. However, DC HEALTHCARE is 2.82 times more volatile than Sime Darby Bhd. It trades about 0.08 of its potential returns per unit of risk. Sime Darby Bhd is currently generating about -0.02 per unit of risk. If you would invest  17.00  in DC HEALTHCARE HOLDINGS on September 27, 2024 and sell it today you would earn a total of  1.00  from holding DC HEALTHCARE HOLDINGS or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DC HEALTHCARE HOLDINGS  vs.  Sime Darby Bhd

DC HEALTHCARE HOLDINGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DC HEALTHCARE HOLDINGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, DC HEALTHCARE is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sime Darby is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with DC HEALTHCARE and Sime Darby

The main advantage of trading using opposite DC HEALTHCARE and Sime Darby positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DC HEALTHCARE position performs unexpectedly, Sime Darby 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 Sime Darby will offset losses from the drop in Sime Darby's long position.

The idea behind DC HEALTHCARE HOLDINGS and Sime Darby Bhd 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.