Correlation Between SIMMTECH and Tokai Carbon

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

By analyzing existing cross correlation between SIMMTECH Co and Tokai Carbon Korea, you can compare the effects of market volatilities on SIMMTECH and Tokai Carbon 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 Tokai Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMMTECH and Tokai Carbon.

Diversification Opportunities for SIMMTECH and Tokai Carbon

0.99

Correlation Coefficient

SIMMTECH  Tokai Carbon

No risk reduction

The 3 months correlation between SIMMTECH and Tokai is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and Tokai Carbon Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokai Carbon Korea 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 Tokai Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokai Carbon Korea has no effect on the direction of SIMMTECH i.e., SIMMTECH and Tokai Carbon go up and down completely randomly.

Pair Corralation between SIMMTECH and Tokai Carbon

Assuming the 90 days trading horizon SIMMTECH Co is expected to under-perform the Tokai Carbon. In addition to that, SIMMTECH is 1.2 times more volatile than Tokai Carbon Korea. It trades about -0.44 of its total potential returns per unit of risk. Tokai Carbon Korea is currently generating about -0.25 per unit of volatility. If you would invest  9,070,000  in Tokai Carbon Korea on September 8, 2024 and sell it today you would lose (2,150,000) from holding Tokai Carbon Korea or give up 23.7% of portfolio value over 90 days.

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

SIMMTECH Co  vs.  Tokai Carbon Korea

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.

Tokai Carbon Korea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokai Carbon Korea 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 SIMMTECH and Tokai Carbon

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

The idea behind SIMMTECH Co and Tokai Carbon Korea 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.