Correlation Between SIM Technology and Advanced Ceramic

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

Diversification Opportunities for SIM Technology and Advanced Ceramic

0.03

Correlation Coefficient

SIM Technology  Advanced Ceramic

Significant diversification

The 3 months correlation between SIM and Advanced is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SIM Technology Group and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X 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 Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of SIM Technology i.e., SIM Technology and Advanced Ceramic go up and down completely randomly.

Pair Corralation between SIM Technology and Advanced Ceramic

Assuming the 90 days trading horizon SIM Technology Group is expected to generate 0.76 times more return on investment than Advanced Ceramic. However, SIM Technology Group is 1.32 times less risky than Advanced Ceramic. It trades about 0.02 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about 0.01 per unit of risk. If you would invest  298.00  in SIM Technology Group on September 25, 2024 and sell it today you would earn a total of  4.00  from holding SIM Technology Group or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

SIM Technology Group  vs.  Advanced Ceramic X

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.

Advanced Ceramic X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Ceramic X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advanced Ceramic 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 Advanced Ceramic

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

The idea behind SIM Technology Group and Advanced Ceramic X 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.