Correlation Between SIM Technology and HTC Corp

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

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

Diversification Opportunities for SIM Technology and HTC Corp

0.54

Correlation Coefficient

SIM Technology  HTC Corp

Very weak diversification

The 3 months correlation between SIM and HTC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SIM Technology Group and HTC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HTC Corp and SIM 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 SIM Technology Group are associated (or correlated) with HTC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HTC Corp has no effect on the direction of SIM Technology i.e., SIM Technology and HTC Corp go up and down completely randomly.

Pair Corralation between SIM Technology and HTC Corp

Assuming the 90 days trading horizon SIM Technology Group is expected to generate 1.13 times more return on investment than HTC Corp. However, SIM Technology is 1.13 times more volatile than HTC Corp. It trades about 0.04 of its potential returns per unit of risk. HTC Corp is currently generating about -0.02 per unit of risk. If you would invest  228.00  in SIM Technology Group on September 25, 2024 and sell it today you would earn a total of  74.00  from holding SIM Technology Group or generate 32.46% return on investment over 90 days.

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

SIM Technology Group  vs.  HTC Corp

SIM Technology Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIM Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

HTC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HTC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HTC Corp 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 SIM Technology and HTC Corp

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

The idea behind SIM Technology Group and HTC Corp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.