Correlation Between Big Yellow and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Big Yellow 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 Big Yellow and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Yellow Group and Sims Metal Management, you can compare the effects of market volatilities on Big Yellow 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 Big Yellow with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Yellow and Sims Metal.
Diversification Opportunities for Big Yellow and Sims Metal
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Big and Sims is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Big Yellow Group 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 Big Yellow 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 Big Yellow Group 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 Big Yellow i.e., Big Yellow and Sims Metal go up and down completely randomly.
Pair Corralation between Big Yellow and Sims Metal
Assuming the 90 days horizon Big Yellow Group is expected to under-perform the Sims Metal. But the stock apears to be less risky and, when comparing its historical volatility, Big Yellow Group is 2.19 times less risky than Sims Metal. The stock trades about -0.17 of its potential returns per unit of risk. The Sims Metal Management is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 755.00 in Sims Metal Management on September 1, 2024 and sell it today you would earn a total of 55.00 from holding Sims Metal Management or generate 7.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Yellow Group vs. Sims Metal Management
Performance |
| Timeline |
| Big Yellow Group |
| Sims Metal Management |
Big Yellow and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Yellow and Sims Metal
The main advantage of trading using opposite Big Yellow and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Yellow 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.| Big Yellow vs. ADRIATIC METALS LS 013355 | Big Yellow vs. PLAYTIKA HOLDING DL 01 | Big Yellow vs. PLAYSTUDIOS A DL 0001 | Big Yellow vs. GREENX METALS LTD |
| Sims Metal vs. Guidewire Software | Sims Metal vs. GREENX METALS LTD | Sims Metal vs. HK Electric Investments | Sims Metal vs. SEI INVESTMENTS |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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