Correlation Between Aluminumof China and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both Aluminumof China 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 Aluminumof China and SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and SIMS METAL MGT, you can compare the effects of market volatilities on Aluminumof China 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 Aluminumof China with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and SIMS METAL.
Diversification Opportunities for Aluminumof China and SIMS METAL
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aluminumof and SIMS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of 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 Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and SIMS METAL go up and down completely randomly.
Pair Corralation between Aluminumof China and SIMS METAL
Assuming the 90 days horizon Aluminum of is expected to generate 1.64 times more return on investment than SIMS METAL. However, Aluminumof China is 1.64 times more volatile than SIMS METAL MGT. It trades about 0.06 of its potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.01 per unit of risk. If you would invest 29.00 in Aluminum of on August 24, 2024 and sell it today you would earn a total of 28.00 from holding Aluminum of or generate 96.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. SIMS METAL MGT
Performance |
| Timeline |
| Aluminumof China |
| SIMS METAL MGT |
Aluminumof China and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and SIMS METAL
The main advantage of trading using opposite Aluminumof China and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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.| Aluminumof China vs. Charter Communications | Aluminumof China vs. SALESFORCE INC CDR | Aluminumof China vs. CODERE ONLINE LUX | Aluminumof China vs. PACIFIC ONLINE |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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