Correlation Between SIMMTECH and AurosTechnology

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

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

Diversification Opportunities for SIMMTECH and AurosTechnology

0.69

Correlation Coefficient

SIMMTECH  AurosTechnology

Poor diversification

The 3 months correlation between SIMMTECH and AurosTechnology is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and AurosTechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AurosTechnology 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 AurosTechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AurosTechnology has no effect on the direction of SIMMTECH i.e., SIMMTECH and AurosTechnology go up and down completely randomly.

Pair Corralation between SIMMTECH and AurosTechnology

Assuming the 90 days trading horizon SIMMTECH Co is expected to generate 0.88 times more return on investment than AurosTechnology. However, SIMMTECH Co is 1.13 times less risky than AurosTechnology. It trades about 0.23 of its potential returns per unit of risk. AurosTechnology is currently generating about 0.17 per unit of risk. If you would invest  1,086,135  in SIMMTECH Co on November 29, 2024 and sell it today you would earn a total of  998,865  from holding SIMMTECH Co or generate 91.97% return on investment over 90 days.

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

SIMMTECH Co  vs.  AurosTechnology

SIMMTECH

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SIMMTECH Co are ranked lower than 17 (%) 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.

AurosTechnology

Risk-Adjusted Performance

Good

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

Pair Trading with SIMMTECH and AurosTechnology

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

The idea behind SIMMTECH Co and AurosTechnology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.