Correlation Between Rubberex M and Sime Darby

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

By analyzing existing cross correlation between Rubberex M and Sime Darby Plantation, you can compare the effects of market volatilities on Rubberex M and Sime Darby 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 Rubberex M with a short position of Sime Darby. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rubberex M and Sime Darby.

Diversification Opportunities for Rubberex M and Sime Darby

-0.08

Correlation Coefficient

Rubberex M  Sime Darby

Good diversification

The 3 months correlation between Rubberex and Sime is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rubberex M and Sime Darby Plantation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Plantation and Rubberex M 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 Rubberex M are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Plantation has no effect on the direction of Rubberex M i.e., Rubberex M and Sime Darby go up and down completely randomly.

Pair Corralation between Rubberex M and Sime Darby

Assuming the 90 days trading horizon Rubberex M is expected to under-perform the Sime Darby. In addition to that, Rubberex M is 2.17 times more volatile than Sime Darby Plantation. It trades about -0.07 of its total potential returns per unit of risk. Sime Darby Plantation is currently generating about 0.03 per unit of volatility. If you would invest  497.00  in Sime Darby Plantation on December 2, 2024 and sell it today you would earn a total of  10.00  from holding Sime Darby Plantation or generate 2.01% return on investment over 90 days.

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

Rubberex M  vs.  Sime Darby Plantation

Rubberex M

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rubberex M has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Rubberex M and Sime Darby

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

The idea behind Rubberex M and Sime Darby Plantation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.