Correlation Between SIMMTECH and IM CoLtd

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

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

Diversification Opportunities for SIMMTECH and IM CoLtd

0.89

Correlation Coefficient

SIMMTECH  IM CoLtd

Very poor diversification

The 3 months correlation between SIMMTECH and 101390 is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and IM CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IM CoLtd 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 IM CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IM CoLtd has no effect on the direction of SIMMTECH i.e., SIMMTECH and IM CoLtd go up and down completely randomly.

Pair Corralation between SIMMTECH and IM CoLtd

Assuming the 90 days trading horizon SIMMTECH Co is expected to generate 0.94 times more return on investment than IM CoLtd. However, SIMMTECH Co is 1.06 times less risky than IM CoLtd. It trades about 0.04 of its potential returns per unit of risk. IM CoLtd is currently generating about -0.05 per unit of risk. If you would invest  1,076,000  in SIMMTECH Co on October 5, 2024 and sell it today you would earn a total of  16,000  from holding SIMMTECH Co or generate 1.49% return on investment over 90 days.

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

SIMMTECH Co  vs.  IM CoLtd

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IM CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IM CoLtd 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 SIMMTECH and IM CoLtd

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

The idea behind SIMMTECH Co and IM CoLtd 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.