Correlation Between Sime Darby and Nova Wellness

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

Diversification Opportunities for Sime Darby and Nova Wellness

SimeNovaDiversified AwaySimeNovaDiversified Away100%
0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Sime and Nova is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Nova Wellness Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Wellness Group 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 Nova Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Wellness Group has no effect on the direction of Sime Darby i.e., Sime Darby and Nova Wellness go up and down completely randomly.

Pair Corralation between Sime Darby and Nova Wellness

Assuming the 90 days trading horizon Sime Darby Bhd is expected to under-perform the Nova Wellness. But the stock apears to be less risky and, when comparing its historical volatility, Sime Darby Bhd is 1.24 times less risky than Nova Wellness. The stock trades about -0.08 of its potential returns per unit of risk. The Nova Wellness Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Nova Wellness Group on October 28, 2024 and sell it today you would lose (4.00) from holding Nova Wellness Group or give up 8.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sime Darby Bhd  vs.  Nova Wellness Group

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10-5051015
JavaScript chart by amCharts 3.21.154197 0201
       Timeline  
Sime Darby Bhd 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2.152.22.252.32.352.4
Nova Wellness Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nova Wellness Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan0.40.410.420.430.440.450.460.47

Sime Darby and Nova Wellness Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.65-1.98-1.32-0.650.00.61.211.822.42 0.080.100.120.140.16
JavaScript chart by amCharts 3.21.154197 0201
       Returns  

Pair Trading with Sime Darby and Nova Wellness

The main advantage of trading using opposite Sime Darby and Nova Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sime Darby position performs unexpectedly, Nova Wellness 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 Nova Wellness will offset losses from the drop in Nova Wellness' long position.
The idea behind Sime Darby Bhd and Nova Wellness Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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