Correlation Between Amazon and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Sims Metal Management, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Sims Metal.
Diversification Opportunities for Amazon and Sims Metal
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Amazon and Sims is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Sims Metal go up and down completely randomly.
Pair Corralation between Amazon and Sims Metal
If you would invest 12,578 in Amazon Inc on September 12, 2024 and sell it today you would earn a total of 9,926 from holding Amazon Inc or generate 78.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 0.27% |
| Values | Daily Returns |
Amazon Inc vs. Sims Metal Management
Performance |
| Timeline |
| Amazon Inc |
| Sims Metal Management |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Sims Metal
The main advantage of trading using opposite Amazon and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.The idea behind Amazon Inc and Sims Metal Management 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.| Sims Metal vs. Steel Dynamics | Sims Metal vs. Cleveland Cliffs | Sims Metal vs. United States Steel | Sims Metal vs. ArcelorMittal SA ADR |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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