Correlation Between Armada Hflr and Sime Darby

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

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

Diversification Opportunities for Armada Hflr and Sime Darby

0.34

Correlation Coefficient

Armada Hflr  Sime Darby

Weak diversification

The 3 months correlation between Armada and Sime is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr 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 Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and Sime Darby go up and down completely randomly.

Pair Corralation between Armada Hflr and Sime Darby

Considering the 90-day investment horizon Armada Hflr Pr is expected to generate 1.08 times more return on investment than Sime Darby. However, Armada Hflr is 1.08 times more volatile than Sime Darby Bhd. It trades about -0.35 of its potential returns per unit of risk. Sime Darby Bhd is currently generating about -0.41 per unit of risk. If you would invest  1,077  in Armada Hflr Pr on October 16, 2024 and sell it today you would lose (103.00) from holding Armada Hflr Pr or give up 9.56% of portfolio value over 90 days.

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

Armada Hflr Pr  vs.  Sime Darby Bhd

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Armada Hflr and Sime Darby

The main advantage of trading using opposite Armada Hflr and Sime Darby positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.