Correlation Between Sime Darby and Techfast Holdings

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

By analyzing existing cross correlation between Sime Darby Plantation and Techfast Holdings Bhd, you can compare the effects of market volatilities on Sime Darby and Techfast Holdings 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 Techfast Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Techfast Holdings.

Diversification Opportunities for Sime Darby and Techfast Holdings

0.03

Correlation Coefficient

Sime Darby  Techfast Holdings

Significant diversification

The 3 months correlation between Sime and Techfast is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Plantation and Techfast Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techfast Holdings 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 Plantation are associated (or correlated) with Techfast Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techfast Holdings Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Techfast Holdings go up and down completely randomly.

Pair Corralation between Sime Darby and Techfast Holdings

Assuming the 90 days trading horizon Sime Darby Plantation is expected to generate 0.34 times more return on investment than Techfast Holdings. However, Sime Darby Plantation is 2.9 times less risky than Techfast Holdings. It trades about 0.01 of its potential returns per unit of risk. Techfast Holdings Bhd is currently generating about 0.0 per unit of risk. If you would invest  485.00  in Sime Darby Plantation on December 25, 2024 and sell it today you would earn a total of  2.00  from holding Sime Darby Plantation or generate 0.41% return on investment over 90 days.

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

Sime Darby Plantation  vs.  Techfast Holdings Bhd

Sime Darby Plantation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sime Darby Plantation 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.

Techfast Holdings Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Techfast Holdings Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Techfast Holdings 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 Techfast Holdings

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

The idea behind Sime Darby Plantation and Techfast Holdings 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.