Correlation Between SIMMTECH and KCC Engineering

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

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

Diversification Opportunities for SIMMTECH and KCC Engineering

0.95

Correlation Coefficient

SIMMTECH  KCC Engineering

Almost no diversification

The 3 months correlation between SIMMTECH and KCC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and KCC Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCC Engineering Cons and SIMMTECH 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 Co are associated (or correlated) with KCC Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCC Engineering Cons has no effect on the direction of SIMMTECH i.e., SIMMTECH and KCC Engineering go up and down completely randomly.

Pair Corralation between SIMMTECH and KCC Engineering

Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the KCC Engineering. In addition to that, SIMMTECH is 1.72 times more volatile than KCC Engineering Construction. It trades about -0.04 of its total potential returns per unit of risk. KCC Engineering Construction is currently generating about -0.05 per unit of volatility. If you would invest  657,243  in KCC Engineering Construction on September 19, 2024 and sell it today you would lose (243,743) from holding KCC Engineering Construction or give up 37.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

SIMMTECH Co  vs.  KCC Engineering Construction

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.

KCC Engineering Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCC Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KCC Engineering 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 and KCC Engineering

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

The idea behind SIMMTECH Co and KCC Engineering Construction 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.