Correlation Between Sime Darby and Advanced Packaging

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

Diversification Opportunities for Sime Darby and Advanced Packaging

-0.12

Correlation Coefficient

Sime Darby  Advanced Packaging

Good diversification

The 3 months correlation between Sime and Advanced is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Plantation and Advanced Packaging Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Packaging Tech 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 Advanced Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Packaging Tech has no effect on the direction of Sime Darby i.e., Sime Darby and Advanced Packaging go up and down completely randomly.

Pair Corralation between Sime Darby and Advanced Packaging

Assuming the 90 days trading horizon Sime Darby Plantation is expected to generate 1.34 times more return on investment than Advanced Packaging. However, Sime Darby is 1.34 times more volatile than Advanced Packaging Tech. It trades about 0.03 of its potential returns per unit of risk. Advanced Packaging Tech is currently generating about -0.01 per unit of risk. If you would invest  481.00  in Sime Darby Plantation on November 29, 2024 and sell it today you would earn a total of  9.00  from holding Sime Darby Plantation or generate 1.87% return on investment over 90 days.

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

Sime Darby Plantation  vs.  Advanced Packaging Tech

Sime Darby Plantation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sime Darby Plantation 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.

Advanced Packaging Tech

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Sime Darby Plantation and Advanced Packaging Tech 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.