Correlation Between Sime Darby and Genetec Technology

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

By analyzing existing cross correlation between Sime Darby Bhd and Genetec Technology Bhd, you can compare the effects of market volatilities on Sime Darby and Genetec Technology 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 Sime Darby with a short position of Genetec Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Genetec Technology.

Diversification Opportunities for Sime Darby and Genetec Technology

-0.3

Correlation Coefficient

Sime Darby  Genetec Technology

Very good diversification

The 3 months correlation between Sime and Genetec is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Genetec Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genetec Technology Bhd and Sime Darby 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 Sime Darby Bhd are associated (or correlated) with Genetec Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genetec Technology Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Genetec Technology go up and down completely randomly.

Pair Corralation between Sime Darby and Genetec Technology

Assuming the 90 days trading horizon Sime Darby Bhd is expected to generate 0.29 times more return on investment than Genetec Technology. However, Sime Darby Bhd is 3.49 times less risky than Genetec Technology. It trades about -0.03 of its potential returns per unit of risk. Genetec Technology Bhd is currently generating about -0.04 per unit of risk. If you would invest  250.00  in Sime Darby Bhd on September 28, 2024 and sell it today you would lose (18.00) from holding Sime Darby Bhd or give up 7.2% of portfolio value over 90 days.

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

Sime Darby Bhd  vs.  Genetec Technology Bhd

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sime Darby is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Genetec Technology Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genetec Technology Bhd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Genetec Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sime Darby and Genetec Technology

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

The idea behind Sime Darby Bhd and Genetec Technology Bhd 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 Transaction History module to view history of all your transactions and understand their impact on performance.