Correlation Between World Energy and Simt High

Can any of the company-specific risk be diversified away by investing in both World Energy and Simt High 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 World Energy and Simt High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between World Energy Fund and Simt High Yield, you can compare the effects of market volatilities on World Energy and Simt High 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 World Energy with a short position of Simt High. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Simt High.

Diversification Opportunities for World Energy and Simt High

0.59

Correlation Coefficient

World Energy  Simt High

Very weak diversification

The 3 months correlation between World and Simt is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Simt High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt High Yield and World Energy 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 World Energy Fund are associated (or correlated) with Simt High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt High Yield has no effect on the direction of World Energy i.e., World Energy and Simt High go up and down completely randomly.

Pair Corralation between World Energy and Simt High

Assuming the 90 days horizon World Energy Fund is expected to generate 4.86 times more return on investment than Simt High. However, World Energy is 4.86 times more volatile than Simt High Yield. It trades about 0.19 of its potential returns per unit of risk. Simt High Yield is currently generating about 0.12 per unit of risk. If you would invest  1,420  in World Energy Fund on October 25, 2024 and sell it today you would earn a total of  196.00  from holding World Energy Fund or generate 13.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

World Energy Fund  vs.  Simt High Yield

World Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Simt High Yield

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt High Yield are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Energy and Simt High

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

The idea behind World Energy Fund and Simt High Yield 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.