Correlation Between Simple Mart and Weltrend Semiconductor

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

By analyzing existing cross correlation between Simple Mart Retail and Weltrend Semiconductor, you can compare the effects of market volatilities on Simple Mart and Weltrend Semiconductor 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 Simple Mart with a short position of Weltrend Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and Weltrend Semiconductor.

Diversification Opportunities for Simple Mart and Weltrend Semiconductor

-0.36

Correlation Coefficient

Simple Mart  Weltrend Semiconductor

Very good diversification

The 3 months correlation between Simple and Weltrend is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and Weltrend Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weltrend Semiconductor and Simple Mart 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 Simple Mart Retail are associated (or correlated) with Weltrend Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weltrend Semiconductor has no effect on the direction of Simple Mart i.e., Simple Mart and Weltrend Semiconductor go up and down completely randomly.

Pair Corralation between Simple Mart and Weltrend Semiconductor

Assuming the 90 days trading horizon Simple Mart is expected to generate 7.16 times less return on investment than Weltrend Semiconductor. But when comparing it to its historical volatility, Simple Mart Retail is 1.93 times less risky than Weltrend Semiconductor. It trades about 0.01 of its potential returns per unit of risk. Weltrend Semiconductor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,150  in Weltrend Semiconductor on September 19, 2024 and sell it today you would earn a total of  1,560  from holding Weltrend Semiconductor or generate 37.59% return on investment over 90 days.

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

Simple Mart Retail  vs.  Weltrend Semiconductor

Simple Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simple Mart Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Simple Mart is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Weltrend Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weltrend Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Weltrend Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simple Mart and Weltrend Semiconductor

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

The idea behind Simple Mart Retail and Weltrend Semiconductor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.