Correlation Between GEELY AUTOMOBILE and Sims Metal
Can any of the company-specific risk be diversified away by investing in both GEELY AUTOMOBILE 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 GEELY AUTOMOBILE and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEELY AUTOMOBILE and Sims Metal Management, you can compare the effects of market volatilities on GEELY AUTOMOBILE 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 GEELY AUTOMOBILE with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEELY AUTOMOBILE and Sims Metal.
Diversification Opportunities for GEELY AUTOMOBILE and Sims Metal
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between GEELY and Sims is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Sims Metal go up and down completely randomly.
Pair Corralation between GEELY AUTOMOBILE and Sims Metal
Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 15.44 times less return on investment than Sims Metal. But when comparing it to its historical volatility, GEELY AUTOMOBILE is 1.24 times less risky than Sims Metal. It trades about 0.03 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 710.00 in Sims Metal Management on November 1, 2024 and sell it today you would earn a total of 90.00 from holding Sims Metal Management or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GEELY AUTOMOBILE vs. Sims Metal Management
Performance |
| Timeline |
| GEELY AUTOMOBILE |
| Sims Metal Management |
GEELY AUTOMOBILE and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GEELY AUTOMOBILE and Sims Metal
The main advantage of trading using opposite GEELY AUTOMOBILE and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEELY AUTOMOBILE 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.| GEELY AUTOMOBILE vs. NorAm Drilling AS | GEELY AUTOMOBILE vs. Ribbon Communications | GEELY AUTOMOBILE vs. UNITED UTILITIES GR | GEELY AUTOMOBILE vs. DXC Technology Co |
| Sims Metal vs. TRADEGATE | Sims Metal vs. SCANSOURCE | Sims Metal vs. Genertec Universal Medical | Sims Metal vs. CompuGroup Medical SE |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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