Correlation Between SIMMTECH and Hana Materials

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

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

Diversification Opportunities for SIMMTECH and Hana Materials

0.94

Correlation Coefficient

SIMMTECH  Hana Materials

Almost no diversification

The 3 months correlation between SIMMTECH and Hana is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and Hana Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Materials 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 Hana Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Materials has no effect on the direction of SIMMTECH i.e., SIMMTECH and Hana Materials go up and down completely randomly.

Pair Corralation between SIMMTECH and Hana Materials

Assuming the 90 days trading horizon SIMMTECH Co is expected to generate 1.34 times more return on investment than Hana Materials. However, SIMMTECH is 1.34 times more volatile than Hana Materials. It trades about 0.18 of its potential returns per unit of risk. Hana Materials is currently generating about 0.19 per unit of risk. If you would invest  1,146,000  in SIMMTECH Co on November 28, 2024 and sell it today you would earn a total of  694,000  from holding SIMMTECH Co or generate 60.56% return on investment over 90 days.

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

SIMMTECH Co  vs.  Hana Materials

SIMMTECH

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SIMMTECH Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SIMMTECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Hana Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMMTECH and Hana Materials

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

The idea behind SIMMTECH Co and Hana Materials 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.