Correlation Between Sime Darby and Sanichi Technology

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

Diversification Opportunities for Sime Darby and Sanichi Technology

-0.34

Correlation Coefficient

Sime Darby  Sanichi Technology

Very good diversification

The 3 months correlation between Sime and Sanichi is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Plantation and Sanichi Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanichi Technology 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 Sanichi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanichi Technology Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Sanichi Technology go up and down completely randomly.

Pair Corralation between Sime Darby and Sanichi Technology

Assuming the 90 days trading horizon Sime Darby is expected to generate 401.21 times less return on investment than Sanichi Technology. But when comparing it to its historical volatility, Sime Darby Plantation is 131.0 times less risky than Sanichi Technology. It trades about 0.07 of its potential returns per unit of risk. Sanichi Technology Bhd is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Sanichi Technology Bhd on September 22, 2024 and sell it today you would lose (7.00) from holding Sanichi Technology Bhd or give up 35.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Sime Darby Plantation  vs.  Sanichi Technology Bhd

Sime Darby Plantation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sime Darby Plantation are ranked lower than 3 (%) 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.

Sanichi Technology Bhd

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sanichi Technology Bhd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sanichi Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sime Darby and Sanichi Technology

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

The idea behind Sime Darby Plantation and Sanichi Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.