Correlation Between SIMS METAL and PREMIER FOODS
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS, you can compare the effects of market volatilities on SIMS METAL and PREMIER FOODS 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 PREMIER FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and PREMIER FOODS.
Diversification Opportunities for SIMS METAL and PREMIER FOODS
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SIMS and PREMIER is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS 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 PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of SIMS METAL i.e., SIMS METAL and PREMIER FOODS go up and down completely randomly.
Pair Corralation between SIMS METAL and PREMIER FOODS
Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 1.82 times more return on investment than PREMIER FOODS. However, SIMS METAL is 1.82 times more volatile than PREMIER FOODS. It trades about 0.11 of its potential returns per unit of risk. PREMIER FOODS is currently generating about 0.11 per unit of risk. If you would invest 765.00 in SIMS METAL MGT on September 2, 2024 and sell it today you would earn a total of 45.00 from holding SIMS METAL MGT or generate 5.88% 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. PREMIER FOODS
Performance |
| Timeline |
| SIMS METAL MGT |
| PREMIER FOODS |
SIMS METAL and PREMIER FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and PREMIER FOODS
The main advantage of trading using opposite SIMS METAL and PREMIER FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, PREMIER FOODS 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 PREMIER FOODS will offset losses from the drop in PREMIER FOODS's long position.| SIMS METAL vs. GFL ENVIRONM | SIMS METAL vs. Charter Communications | SIMS METAL vs. NIPPON STEEL SPADR | SIMS METAL vs. Entravision Communications |
| PREMIER FOODS vs. SIVERS SEMICONDUCTORS AB | PREMIER FOODS vs. Darden Restaurants | PREMIER FOODS vs. Reliance Steel Aluminum | PREMIER FOODS vs. Q2M Managementberatung AG |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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