Correlation Between SIMS METAL and CDL INVESTMENT
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT, you can compare the effects of market volatilities on SIMS METAL and CDL INVESTMENT 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 CDL INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and CDL INVESTMENT.
Diversification Opportunities for SIMS METAL and CDL INVESTMENT
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SIMS and CDL is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and CDL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDL INVESTMENT 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 CDL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDL INVESTMENT has no effect on the direction of SIMS METAL i.e., SIMS METAL and CDL INVESTMENT go up and down completely randomly.
Pair Corralation between SIMS METAL and CDL INVESTMENT
Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.73 times less return on investment than CDL INVESTMENT. In addition to that, SIMS METAL is 1.57 times more volatile than CDL INVESTMENT. It trades about 0.1 of its total potential returns per unit of risk. CDL INVESTMENT is currently generating about 0.26 per unit of volatility. If you would invest 39.00 in CDL INVESTMENT on September 4, 2024 and sell it today you would earn a total of 4.00 from holding CDL INVESTMENT or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. CDL INVESTMENT
Performance |
| Timeline |
| SIMS METAL MGT |
| CDL INVESTMENT |
SIMS METAL and CDL INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and CDL INVESTMENT
The main advantage of trading using opposite SIMS METAL and CDL INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, CDL INVESTMENT 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 CDL INVESTMENT will offset losses from the drop in CDL INVESTMENT's long position.| SIMS METAL vs. Sterling Construction | SIMS METAL vs. National Storage Affiliates | SIMS METAL vs. Chongqing Machinery Electric | SIMS METAL vs. Pure Storage |
| CDL INVESTMENT vs. TOTAL GABON | CDL INVESTMENT vs. Walgreens Boots Alliance | CDL INVESTMENT vs. Peak Resources Limited |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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