Correlation Between SIMS METAL and National Beverage
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and National Beverage 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 SIMS METAL and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIMS METAL MGT and National Beverage Corp, you can compare the effects of market volatilities on SIMS METAL and National Beverage 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 SIMS METAL with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and National Beverage.
Diversification Opportunities for SIMS METAL and National Beverage
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SIMS and National is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and SIMS METAL 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 SIMS METAL MGT are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of SIMS METAL i.e., SIMS METAL and National Beverage go up and down completely randomly.
Pair Corralation between SIMS METAL and National Beverage
Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.95 times less return on investment than National Beverage. In addition to that, SIMS METAL is 1.47 times more volatile than National Beverage Corp. It trades about 0.11 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.31 per unit of volatility. If you would invest 4,120 in National Beverage Corp on September 2, 2024 and sell it today you would earn a total of 540.00 from holding National Beverage Corp or generate 13.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. National Beverage Corp
Performance |
| Timeline |
| SIMS METAL MGT |
| National Beverage Corp |
SIMS METAL and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and National Beverage
The main advantage of trading using opposite SIMS METAL and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| SIMS METAL vs. GFL ENVIRONM | SIMS METAL vs. Charter Communications | SIMS METAL vs. NIPPON STEEL SPADR | SIMS METAL vs. Entravision Communications |
| National Beverage vs. PepsiCo | National Beverage vs. Superior Plus Corp | National Beverage vs. NMI Holdings | National Beverage vs. Origin Agritech |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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