Correlation Between SIMS METAL and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Ambac Financial 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 Ambac Financial 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 Ambac Financial Group, you can compare the effects of market volatilities on SIMS METAL and Ambac Financial 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 Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Ambac Financial.
Diversification Opportunities for SIMS METAL and Ambac Financial
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SIMS and Ambac is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Ambac Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambac Financial 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 Ambac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambac Financial Group has no effect on the direction of SIMS METAL i.e., SIMS METAL and Ambac Financial go up and down completely randomly.
Pair Corralation between SIMS METAL and Ambac Financial
Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the Ambac Financial. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 1.22 times less risky than Ambac Financial. The stock trades about -0.15 of its potential returns per unit of risk. The Ambac Financial Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,130 in Ambac Financial Group on September 23, 2024 and sell it today you would earn a total of 30.00 from holding Ambac Financial Group or generate 2.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. Ambac Financial Group
Performance |
| Timeline |
| SIMS METAL MGT |
| Ambac Financial Group |
SIMS METAL and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Ambac Financial
The main advantage of trading using opposite SIMS METAL and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, Ambac Financial 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 Ambac Financial will offset losses from the drop in Ambac Financial's long position.The idea behind SIMS METAL MGT and Ambac Financial 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.| Ambac Financial vs. PLAYMATES TOYS | Ambac Financial vs. CHINA TONTINE WINES | Ambac Financial vs. SIMS METAL MGT | Ambac Financial vs. PENN NATL GAMING |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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