Correlation Between Sime Darby and Mercury Industries

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

Diversification Opportunities for Sime Darby and Mercury Industries

-0.1

Correlation Coefficient

Sime Darby  Mercury Industries

Good diversification

The 3 months correlation between Sime and Mercury is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Mercury Industries Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Industries 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 Mercury Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Industries Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Mercury Industries go up and down completely randomly.

Pair Corralation between Sime Darby and Mercury Industries

Assuming the 90 days trading horizon Sime Darby Bhd is expected to under-perform the Mercury Industries. But the stock apears to be less risky and, when comparing its historical volatility, Sime Darby Bhd is 1.03 times less risky than Mercury Industries. The stock trades about -0.13 of its potential returns per unit of risk. The Mercury Industries Bhd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Mercury Industries Bhd on December 23, 2024 and sell it today you would earn a total of  0.00  from holding Mercury Industries Bhd or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Sime Darby Bhd  vs.  Mercury Industries Bhd

Sime Darby Bhd

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mercury Industries Bhd

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sime Darby and Mercury Industries

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

The idea behind Sime Darby Bhd and Mercury Industries 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.