Correlation Between SFA Semicon and Simmtech Holdings

Can any of the company-specific risk be diversified away by investing in both SFA Semicon and Simmtech Holdings 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 SFA Semicon and Simmtech Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SFA Semicon Co and Simmtech Holdings Co, you can compare the effects of market volatilities on SFA Semicon and Simmtech Holdings 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 SFA Semicon with a short position of Simmtech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFA Semicon and Simmtech Holdings.

Diversification Opportunities for SFA Semicon and Simmtech Holdings

0.86

Correlation Coefficient

SFA Semicon  Simmtech Holdings

Very poor diversification

The 3 months correlation between SFA and Simmtech is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SFA Semicon Co and Simmtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmtech Holdings and SFA Semicon 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 SFA Semicon Co are associated (or correlated) with Simmtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmtech Holdings has no effect on the direction of SFA Semicon i.e., SFA Semicon and Simmtech Holdings go up and down completely randomly.

Pair Corralation between SFA Semicon and Simmtech Holdings

Assuming the 90 days trading horizon SFA Semicon Co is expected to generate 1.09 times more return on investment than Simmtech Holdings. However, SFA Semicon is 1.09 times more volatile than Simmtech Holdings Co. It trades about -0.07 of its potential returns per unit of risk. Simmtech Holdings Co is currently generating about -0.19 per unit of risk. If you would invest  477,000  in SFA Semicon Co on October 25, 2024 and sell it today you would lose (128,500) from holding SFA Semicon Co or give up 26.94% of portfolio value over 90 days.

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

SFA Semicon Co  vs.  Simmtech Holdings Co

SFA Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Semicon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SFA Semicon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Simmtech Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simmtech Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SFA Semicon and Simmtech Holdings

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

The idea behind SFA Semicon Co and Simmtech Holdings Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.