Correlation Between Sime Darby and Press Metal

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

Diversification Opportunities for Sime Darby and Press Metal

0.05

Correlation Coefficient

Sime Darby  Press Metal

Significant diversification

The 3 months correlation between Sime and Press is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Press Metal Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Press Metal 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 Press Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Press Metal Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Press Metal go up and down completely randomly.

Pair Corralation between Sime Darby and Press Metal

Assuming the 90 days trading horizon Sime Darby is expected to generate 3.17 times less return on investment than Press Metal. But when comparing it to its historical volatility, Sime Darby Bhd is 1.0 times less risky than Press Metal. It trades about 0.03 of its potential returns per unit of risk. Press Metal Bhd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Press Metal Bhd on November 19, 2024 and sell it today you would earn a total of  41.00  from holding Press Metal Bhd or generate 8.93% return on investment over 90 days.

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

Sime Darby Bhd  vs.  Press Metal Bhd

Sime Darby Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sime Darby Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Press Metal Bhd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Press Metal Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Press Metal may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Sime Darby and Press Metal

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

The idea behind Sime Darby Bhd and Press Metal 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.