Correlation Between SIMS METAL and Alaska Air
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Alaska Air 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 Alaska Air 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 Alaska Air Group, you can compare the effects of market volatilities on SIMS METAL and Alaska Air 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 Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Alaska Air.
Diversification Opportunities for SIMS METAL and Alaska Air
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SIMS and Alaska is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of SIMS METAL i.e., SIMS METAL and Alaska Air go up and down completely randomly.
Pair Corralation between SIMS METAL and Alaska Air
Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 1.24 times less risky than Alaska Air. The stock trades about -0.02 of its potential returns per unit of risk. The Alaska Air Group is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,065 in Alaska Air Group on September 13, 2024 and sell it today you would earn a total of 1,815 from holding Alaska Air Group or generate 44.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
SIMS METAL MGT vs. Alaska Air Group
Performance |
| Timeline |
| SIMS METAL MGT |
| Alaska Air Group |
SIMS METAL and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Alaska Air
The main advantage of trading using opposite SIMS METAL and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.The idea behind SIMS METAL MGT and Alaska Air Group 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.| Alaska Air vs. Aluminum of | Alaska Air vs. GRIFFIN MINING LTD | Alaska Air vs. ADRIATIC METALS LS 013355 | Alaska Air 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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