Correlation Between Lucid and SIMPPLE

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

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

Diversification Opportunities for Lucid and SIMPPLE

-0.7

Correlation Coefficient

Lucid  SIMPPLE

Excellent diversification

The 3 months correlation between Lucid and SIMPPLE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and SIMPPLE LTD Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMPPLE LTD Ordinary and Lucid 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 Lucid Group are associated (or correlated) with SIMPPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMPPLE LTD Ordinary has no effect on the direction of Lucid i.e., Lucid and SIMPPLE go up and down completely randomly.

Pair Corralation between Lucid and SIMPPLE

Given the investment horizon of 90 days Lucid Group is expected to under-perform the SIMPPLE. But the stock apears to be less risky and, when comparing its historical volatility, Lucid Group is 3.46 times less risky than SIMPPLE. The stock trades about -0.03 of its potential returns per unit of risk. The SIMPPLE LTD Ordinary is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  490.00  in SIMPPLE LTD Ordinary on September 4, 2024 and sell it today you would lose (388.00) from holding SIMPPLE LTD Ordinary or give up 79.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	62.42%
Values	Daily Returns

Lucid Group  vs.  SIMPPLE LTD Ordinary

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SIMPPLE LTD Ordinary

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMPPLE LTD Ordinary are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, SIMPPLE disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucid and SIMPPLE

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

The idea behind Lucid Group and SIMPPLE LTD Ordinary 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.