Correlation Between Neo Neon and SIM Technology

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

By analyzing existing cross correlation between Neo Neon Holdings Limited and SIM Technology Group, you can compare the effects of market volatilities on Neo Neon and SIM Technology 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 Neo Neon with a short position of SIM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neo Neon and SIM Technology.

Diversification Opportunities for Neo Neon and SIM Technology

0.43

Correlation Coefficient

Neo Neon  SIM Technology

Very weak diversification

The 3 months correlation between Neo and SIM is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Neo Neon Holdings Limited and SIM Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIM Technology Group and Neo Neon 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 Neo Neon Holdings Limited are associated (or correlated) with SIM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIM Technology Group has no effect on the direction of Neo Neon i.e., Neo Neon and SIM Technology go up and down completely randomly.

Pair Corralation between Neo Neon and SIM Technology

Assuming the 90 days trading horizon Neo Neon is expected to generate 1.47 times less return on investment than SIM Technology. But when comparing it to its historical volatility, Neo Neon Holdings Limited is 1.17 times less risky than SIM Technology. It trades about 0.04 of its potential returns per unit of risk. SIM Technology Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  207.00  in SIM Technology Group on September 28, 2024 and sell it today you would earn a total of  96.00  from holding SIM Technology Group or generate 46.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.69%
Values	Daily Returns

Neo Neon Holdings Limited  vs.  SIM Technology Group

Neo Neon Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neo Neon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Neo Neon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SIM Technology Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIM Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SIM Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Neo Neon and SIM Technology

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

The idea behind Neo Neon Holdings Limited and SIM Technology Group 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.