Correlation Between Total Soft and SIMMTECH

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

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

Diversification Opportunities for Total Soft and SIMMTECH

-0.5

Correlation Coefficient

Total Soft  SIMMTECH

Very good diversification

The 3 months correlation between Total and SIMMTECH is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and SIMMTECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMMTECH and Total Soft 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 Total Soft Bank are associated (or correlated) with SIMMTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMMTECH has no effect on the direction of Total Soft i.e., Total Soft and SIMMTECH go up and down completely randomly.

Pair Corralation between Total Soft and SIMMTECH

Assuming the 90 days trading horizon Total Soft Bank is expected to generate 2.97 times more return on investment than SIMMTECH. However, Total Soft is 2.97 times more volatile than SIMMTECH Co. It trades about 0.15 of its potential returns per unit of risk. SIMMTECH Co is currently generating about -0.24 per unit of risk. If you would invest  481,000  in Total Soft Bank on September 23, 2024 and sell it today you would earn a total of  401,000  from holding Total Soft Bank or generate 83.37% return on investment over 90 days.

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

Total Soft Bank  vs.  SIMMTECH Co

Total Soft Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

SIMMTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMMTECH 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Total Soft and SIMMTECH

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

The idea behind Total Soft Bank and SIMMTECH 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.