Correlation Between Sembcorp Marine and Firan Technology

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

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

Diversification Opportunities for Sembcorp Marine and Firan Technology

0.67

Correlation Coefficient

Sembcorp Marine  Firan Technology

Poor diversification

The 3 months correlation between Sembcorp and Firan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Marine and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology and Sembcorp Marine 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 Sembcorp Marine are associated (or correlated) with Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of Sembcorp Marine i.e., Sembcorp Marine and Firan Technology go up and down completely randomly.

Pair Corralation between Sembcorp Marine and Firan Technology

Assuming the 90 days horizon Sembcorp Marine is expected to generate 2.22 times more return on investment than Firan Technology. However, Sembcorp Marine is 2.22 times more volatile than Firan Technology Group. It trades about 0.07 of its potential returns per unit of risk. Firan Technology Group is currently generating about 0.04 per unit of risk. If you would invest  134.00  in Sembcorp Marine on December 29, 2024 and sell it today you would earn a total of  20.00  from holding Sembcorp Marine or generate 14.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Sembcorp Marine  vs.  Firan Technology Group

Sembcorp Marine

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sembcorp Marine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Sembcorp Marine reported solid returns over the last few months and may actually be approaching a breakup point.

Firan Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Firan Technology Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Firan Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sembcorp Marine and Firan Technology

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

The idea behind Sembcorp Marine and Firan Technology Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.