Correlation Between Simplo Technology and Ardentec

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

By analyzing existing cross correlation between Simplo Technology Co and Ardentec, you can compare the effects of market volatilities on Simplo Technology and Ardentec 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 Simplo Technology with a short position of Ardentec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplo Technology and Ardentec.

Diversification Opportunities for Simplo Technology and Ardentec

-0.45

Correlation Coefficient

Simplo Technology  Ardentec

Very good diversification

The 3 months correlation between Simplo and Ardentec is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Simplo Technology Co and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec and Simplo Technology 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 Simplo Technology Co are associated (or correlated) with Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Simplo Technology i.e., Simplo Technology and Ardentec go up and down completely randomly.

Pair Corralation between Simplo Technology and Ardentec

Assuming the 90 days trading horizon Simplo Technology Co is expected to generate 1.12 times more return on investment than Ardentec. However, Simplo Technology is 1.12 times more volatile than Ardentec. It trades about 0.01 of its potential returns per unit of risk. Ardentec is currently generating about -0.03 per unit of risk. If you would invest  39,750  in Simplo Technology Co on October 9, 2024 and sell it today you would lose (100.00) from holding Simplo Technology Co or give up 0.25% of portfolio value over 90 days.

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

Simplo Technology Co  vs.  Ardentec

Simplo Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simplo Technology Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Simplo Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Ardentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardentec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ardentec is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Simplo Technology and Ardentec

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

The idea behind Simplo Technology Co and Ardentec 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.