Correlation Between Western Copper and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both Western Copper and SIMS METAL 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 Western Copper and SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Copper and and SIMS METAL MGT, you can compare the effects of market volatilities on Western Copper and SIMS METAL 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 Western Copper with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and SIMS METAL.
Diversification Opportunities for Western Copper and SIMS METAL
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and SIMS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT and Western Copper 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 Western Copper and are associated (or correlated) with SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of Western Copper i.e., Western Copper and SIMS METAL go up and down completely randomly.
Pair Corralation between Western Copper and SIMS METAL
Assuming the 90 days trading horizon Western Copper and is expected to under-perform the SIMS METAL. In addition to that, Western Copper is 1.3 times more volatile than SIMS METAL MGT. It trades about -0.01 of its total potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.09 per unit of volatility. If you would invest 646.00 in SIMS METAL MGT on September 2, 2024 and sell it today you would earn a total of 164.00 from holding SIMS METAL MGT or generate 25.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Copper and vs. SIMS METAL MGT
Performance |
| Timeline |
| Western Copper |
| SIMS METAL MGT |
Western Copper and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Copper and SIMS METAL
The main advantage of trading using opposite Western Copper and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper position performs unexpectedly, SIMS METAL 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 SIMS METAL will offset losses from the drop in SIMS METAL's long position.| Western Copper vs. American Eagle Outfitters | Western Copper vs. American Homes 4 | Western Copper vs. URBAN OUTFITTERS | Western Copper vs. LGI Homes |
| SIMS METAL vs. GFL ENVIRONM | SIMS METAL vs. Charter Communications | SIMS METAL vs. NIPPON STEEL SPADR | SIMS METAL vs. Entravision Communications |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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