Correlation Between Computer Forms and Sime Darby

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

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

Diversification Opportunities for Computer Forms and Sime Darby

0.75

Correlation Coefficient

Computer Forms  Sime Darby

Poor diversification

The 3 months correlation between Computer and Sime is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Computer Forms Bhd and Sime Darby Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Bhd and Computer Forms 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 Computer Forms Bhd 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 Bhd has no effect on the direction of Computer Forms i.e., Computer Forms and Sime Darby go up and down completely randomly.

Pair Corralation between Computer Forms and Sime Darby

Assuming the 90 days trading horizon Computer Forms Bhd is expected to under-perform the Sime Darby. In addition to that, Computer Forms is 2.04 times more volatile than Sime Darby Bhd. It trades about -0.11 of its total potential returns per unit of risk. Sime Darby Bhd is currently generating about 0.03 per unit of volatility. If you would invest  232.00  in Sime Darby Bhd on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Sime Darby Bhd or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Computer Forms Bhd  vs.  Sime Darby Bhd

Computer Forms Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Forms Bhd 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Computer Forms and Sime Darby

The main advantage of trading using opposite Computer Forms and Sime Darby positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer Forms 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 Computer Forms Bhd and Sime Darby 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.