Correlation Between Sime Darby and Carlsberg Brewery

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

Diversification Opportunities for Sime Darby and Carlsberg Brewery

-0.55

Correlation Coefficient

Sime Darby  Carlsberg Brewery

Excellent diversification

The 3 months correlation between Sime and Carlsberg is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Carlsberg Brewery Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg Brewery 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 Carlsberg Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg Brewery has no effect on the direction of Sime Darby i.e., Sime Darby and Carlsberg Brewery go up and down completely randomly.

Pair Corralation between Sime Darby and Carlsberg Brewery

Assuming the 90 days trading horizon Sime Darby is expected to generate 1.2 times less return on investment than Carlsberg Brewery. In addition to that, Sime Darby is 1.67 times more volatile than Carlsberg Brewery Malaysia. It trades about 0.02 of its total potential returns per unit of risk. Carlsberg Brewery Malaysia is currently generating about 0.05 per unit of volatility. If you would invest  1,857  in Carlsberg Brewery Malaysia on October 5, 2024 and sell it today you would earn a total of  223.00  from holding Carlsberg Brewery Malaysia or generate 12.01% return on investment over 90 days.

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

Sime Darby Bhd  vs.  Carlsberg Brewery Malaysia

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 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.

Carlsberg Brewery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Carlsberg Brewery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sime Darby and Carlsberg Brewery

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

The idea behind Sime Darby Bhd and Carlsberg Brewery Malaysia 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.