Correlation Between SIMS METAL and Martifer SGPS
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Martifer SGPS 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 Martifer SGPS 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 Martifer SGPS SA, you can compare the effects of market volatilities on SIMS METAL and Martifer SGPS 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 Martifer SGPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Martifer SGPS.
Diversification Opportunities for SIMS METAL and Martifer SGPS
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SIMS and Martifer is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Martifer SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martifer SGPS 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 Martifer SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martifer SGPS SA has no effect on the direction of SIMS METAL i.e., SIMS METAL and Martifer SGPS go up and down completely randomly.
Pair Corralation between SIMS METAL and Martifer SGPS
Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the Martifer SGPS. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 1.16 times less risky than Martifer SGPS. The stock trades about -0.02 of its potential returns per unit of risk. The Martifer SGPS SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 124.00 in Martifer SGPS SA on September 14, 2024 and sell it today you would earn a total of 50.00 from holding Martifer SGPS SA or generate 40.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. Martifer SGPS SA
Performance |
| Timeline |
| SIMS METAL MGT |
| Martifer SGPS SA |
SIMS METAL and Martifer SGPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Martifer SGPS
The main advantage of trading using opposite SIMS METAL and Martifer SGPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, Martifer SGPS 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 Martifer SGPS will offset losses from the drop in Martifer SGPS's long position.The idea behind SIMS METAL MGT and Martifer SGPS 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.| Martifer SGPS vs. Molson Coors Beverage | Martifer SGPS vs. SIMS METAL MGT | Martifer SGPS vs. CarsalesCom | Martifer SGPS vs. Fevertree Drinks PLC |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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