Correlation Between ENERGY ONE and Sims Metal
Can any of the company-specific risk be diversified away by investing in both ENERGY ONE 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 ENERGY ONE and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENERGY ONE and Sims Metal Management, you can compare the effects of market volatilities on ENERGY ONE 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 ENERGY ONE with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGY ONE and Sims Metal.
Diversification Opportunities for ENERGY ONE and Sims Metal
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ENERGY and Sims is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ENERGY ONE 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 ENERGY ONE 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 ENERGY ONE 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 ENERGY ONE i.e., ENERGY ONE and Sims Metal go up and down completely randomly.
Pair Corralation between ENERGY ONE and Sims Metal
Assuming the 90 days trading horizon ENERGY ONE is expected to generate 1.53 times more return on investment than Sims Metal. However, ENERGY ONE is 1.53 times more volatile than Sims Metal Management. It trades about 0.14 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.07 per unit of risk. If you would invest 344.00 in ENERGY ONE on September 15, 2024 and sell it today you would earn a total of 32.00 from holding ENERGY ONE or generate 9.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
ENERGY ONE vs. Sims Metal Management
Performance |
| Timeline |
| ENERGY ONE |
| Sims Metal Management |
ENERGY ONE and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENERGY ONE and Sims Metal
The main advantage of trading using opposite ENERGY ONE and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENERGY ONE 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.| ENERGY ONE vs. Sims Metal Management | ENERGY ONE vs. CeoTronics AG | ENERGY ONE vs. Cleanaway Waste Management | ENERGY ONE vs. SLR Investment Corp |
| Sims Metal vs. Reliance Steel Aluminum | Sims Metal vs. Superior Plus Corp | Sims Metal vs. SIVERS SEMICONDUCTORS AB | Sims Metal vs. Norsk Hydro ASA |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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