Correlation Between Hana Materials and SIMMTECH

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

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

Diversification Opportunities for Hana Materials and SIMMTECH

0.94

Correlation Coefficient

Hana Materials  SIMMTECH

Almost no diversification

The 3 months correlation between Hana and SIMMTECH is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and SIMMTECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMMTECH and Hana Materials 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 Hana Materials are associated (or correlated) with SIMMTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMMTECH has no effect on the direction of Hana Materials i.e., Hana Materials and SIMMTECH go up and down completely randomly.

Pair Corralation between Hana Materials and SIMMTECH

Assuming the 90 days trading horizon Hana Materials is expected to generate 1.07 times more return on investment than SIMMTECH. However, Hana Materials is 1.07 times more volatile than SIMMTECH Co. It trades about -0.01 of its potential returns per unit of risk. SIMMTECH Co is currently generating about -0.05 per unit of risk. If you would invest  3,482,656  in Hana Materials on August 20, 2024 and sell it today you would lose (967,656) from holding Hana Materials or give up 27.79% of portfolio value over 90 days.

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

Hana Materials  vs.  SIMMTECH Co

Hana Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

SIMMTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMMTECH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hana Materials and SIMMTECH

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

The idea behind Hana Materials and SIMMTECH Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.