Correlation Between SIMS METAL and GLOBAL COSMED
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and GLOBAL COSMED 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 GLOBAL COSMED 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 GLOBAL MED SA, you can compare the effects of market volatilities on SIMS METAL and GLOBAL COSMED 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 GLOBAL COSMED. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and GLOBAL COSMED.
Diversification Opportunities for SIMS METAL and GLOBAL COSMED
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SIMS and GLOBAL is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and GLOBAL MED SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBAL MED SA 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 GLOBAL COSMED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBAL MED SA has no effect on the direction of SIMS METAL i.e., SIMS METAL and GLOBAL COSMED go up and down completely randomly.
Pair Corralation between SIMS METAL and GLOBAL COSMED
Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the GLOBAL COSMED. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 1.37 times less risky than GLOBAL COSMED. The stock trades about -0.02 of its potential returns per unit of risk. The GLOBAL MED SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 67.00 in GLOBAL MED SA on September 14, 2024 and sell it today you would earn a total of 44.00 from holding GLOBAL MED SA or generate 65.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. GLOBAL MED SA
Performance |
| Timeline |
| SIMS METAL MGT |
| GLOBAL MED SA |
SIMS METAL and GLOBAL COSMED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and GLOBAL COSMED
The main advantage of trading using opposite SIMS METAL and GLOBAL COSMED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, GLOBAL COSMED 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 GLOBAL COSMED will offset losses from the drop in GLOBAL COSMED's long position.The idea behind SIMS METAL MGT and GLOBAL MED SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| GLOBAL COSMED vs. Jacquet Metal Service | GLOBAL COSMED vs. Lion One Metals | GLOBAL COSMED vs. CHINA TONTINE WINES | GLOBAL COSMED vs. SIMS METAL MGT |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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