Correlation Between LEGACY IRON and Sims Metal
Can any of the company-specific risk be diversified away by investing in both LEGACY IRON 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 LEGACY IRON and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGACY IRON ORE and Sims Metal Management, you can compare the effects of market volatilities on LEGACY IRON 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 LEGACY IRON with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and Sims Metal.
Diversification Opportunities for LEGACY IRON and Sims Metal
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LEGACY and Sims is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management and LEGACY IRON 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 LEGACY IRON ORE 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 Management has no effect on the direction of LEGACY IRON i.e., LEGACY IRON and Sims Metal go up and down completely randomly.
Pair Corralation between LEGACY IRON and Sims Metal
Assuming the 90 days trading horizon LEGACY IRON ORE is expected to under-perform the Sims Metal. But the stock apears to be less risky and, when comparing its historical volatility, LEGACY IRON ORE is 3.29 times less risky than Sims Metal. The stock trades about -0.08 of its potential returns per unit of risk. The Sims Metal Management is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 797.00 in Sims Metal Management on September 14, 2024 and sell it today you would lose (32.00) from holding Sims Metal Management or give up 4.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LEGACY IRON ORE vs. Sims Metal Management
Performance |
| Timeline |
| LEGACY IRON ORE |
| Sims Metal Management |
LEGACY IRON and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGACY IRON and Sims Metal
The main advantage of trading using opposite LEGACY IRON and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGACY IRON 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.| LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc |
| Sims Metal vs. ArcelorMittal | Sims Metal vs. NIPPON STEEL SPADR | Sims Metal vs. Reliance Steel Aluminum | Sims Metal vs. Superior Plus Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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