Correlation Between Simmtech Holdings and KMH Hitech

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

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

Diversification Opportunities for Simmtech Holdings and KMH Hitech

0.89

Correlation Coefficient

Simmtech Holdings  KMH Hitech

Very poor diversification

The 3 months correlation between Simmtech and KMH is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Simmtech Holdings Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and Simmtech Holdings 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 Simmtech Holdings Co are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of Simmtech Holdings i.e., Simmtech Holdings and KMH Hitech go up and down completely randomly.

Pair Corralation between Simmtech Holdings and KMH Hitech

Assuming the 90 days trading horizon Simmtech Holdings Co is expected to generate 1.84 times more return on investment than KMH Hitech. However, Simmtech Holdings is 1.84 times more volatile than KMH Hitech Co. It trades about 0.42 of its potential returns per unit of risk. KMH Hitech Co is currently generating about 0.57 per unit of risk. If you would invest  98,000  in Simmtech Holdings Co on October 11, 2024 and sell it today you would earn a total of  22,000  from holding Simmtech Holdings Co or generate 22.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Simmtech Holdings Co  vs.  KMH Hitech Co

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.

KMH Hitech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Simmtech Holdings and KMH Hitech

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

The idea behind Simmtech Holdings Co and KMH Hitech 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.