Correlation Between SIMMTECH and RF Materials

Can any of the company-specific risk be diversified away by investing in both SIMMTECH and RF 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 RF 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 RF Materials Co, you can compare the effects of market volatilities on SIMMTECH and RF 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 RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMMTECH and RF Materials.

Diversification Opportunities for SIMMTECH and RF Materials

0.61

Correlation Coefficient

SIMMTECH  RF Materials

Poor diversification

The 3 months correlation between SIMMTECH and 327260 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SIMMTECH Co and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of SIMMTECH i.e., SIMMTECH and RF Materials go up and down completely randomly.

Pair Corralation between SIMMTECH and RF Materials

Assuming the 90 days trading horizon SIMMTECH Co is expected to generate 1.49 times more return on investment than RF Materials. However, SIMMTECH is 1.49 times more volatile than RF Materials Co. It trades about 0.23 of its potential returns per unit of risk. RF Materials Co is currently generating about 0.07 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.  RF Materials Co

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.

RF Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RF Materials Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RF Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMMTECH and RF Materials

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

The idea behind SIMMTECH Co and RF Materials Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.