Correlation Between Simplo Technology and Advanced Energy

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

Diversification Opportunities for Simplo Technology and Advanced Energy

0.32

Correlation Coefficient

Simplo Technology  Advanced Energy

Weak diversification

The 3 months correlation between Simplo and Advanced is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Simplo Technology Co and Advanced Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Solution 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 Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Solution has no effect on the direction of Simplo Technology i.e., Simplo Technology and Advanced Energy go up and down completely randomly.

Pair Corralation between Simplo Technology and Advanced Energy

Assuming the 90 days trading horizon Simplo Technology Co is expected to generate 0.45 times more return on investment than Advanced Energy. However, Simplo Technology Co is 2.23 times less risky than Advanced Energy. It trades about -0.03 of its potential returns per unit of risk. Advanced Energy Solution is currently generating about -0.07 per unit of risk. If you would invest  39,700  in Simplo Technology Co on December 31, 2024 and sell it today you would lose (1,600) from holding Simplo Technology Co or give up 4.03% of portfolio value over 90 days.

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

Simplo Technology Co  vs.  Advanced Energy Solution

Simplo Technology

Risk-Adjusted Performance

Very Weak

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

Advanced Energy Solution

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Energy Solution has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in May 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Simplo Technology and Advanced Energy

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

The idea behind Simplo Technology Co and Advanced Energy Solution 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.