Correlation Between Simpson Manufacturing and Joint Stock

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

By analyzing existing cross correlation between Simpson Manufacturing and Joint Stock, you can compare the effects of market volatilities on Simpson Manufacturing and Joint Stock 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 Simpson Manufacturing with a short position of Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simpson Manufacturing and Joint Stock.

Diversification Opportunities for Simpson Manufacturing and Joint Stock

0.82

Correlation Coefficient

Simpson Manufacturing  Joint Stock

Very poor diversification

The 3 months correlation between Simpson and Joint is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Simpson Manufacturing and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock and Simpson Manufacturing 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 Simpson Manufacturing are associated (or correlated) with Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Simpson Manufacturing i.e., Simpson Manufacturing and Joint Stock go up and down completely randomly.

Pair Corralation between Simpson Manufacturing and Joint Stock

Considering the 90-day investment horizon Simpson Manufacturing is expected to generate 0.9 times more return on investment than Joint Stock. However, Simpson Manufacturing is 1.11 times less risky than Joint Stock. It trades about -0.03 of its potential returns per unit of risk. Joint Stock is currently generating about -0.12 per unit of risk. If you would invest  17,618  in Simpson Manufacturing on October 23, 2024 and sell it today you would lose (739.00) from holding Simpson Manufacturing or give up 4.19% of portfolio value over 90 days.

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

Simpson Manufacturing  vs.  Joint Stock

Simpson Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simpson Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Simpson Manufacturing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Simpson Manufacturing and Joint Stock

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

The idea behind Simpson Manufacturing and Joint Stock 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.