Correlation Between SIMS METAL and Jacquet Metal
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Jacquet Metal 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 Jacquet Metal 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 Jacquet Metal Service, you can compare the effects of market volatilities on SIMS METAL and Jacquet Metal 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 Jacquet Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Jacquet Metal.
Diversification Opportunities for SIMS METAL and Jacquet Metal
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SIMS and Jacquet is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Jacquet Metal Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacquet Metal Service 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 Jacquet Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacquet Metal Service has no effect on the direction of SIMS METAL i.e., SIMS METAL and Jacquet Metal go up and down completely randomly.
Pair Corralation between SIMS METAL and Jacquet Metal
Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.51 times less return on investment than Jacquet Metal. In addition to that, SIMS METAL is 1.22 times more volatile than Jacquet Metal Service. It trades about 0.01 of its total potential returns per unit of risk. Jacquet Metal Service is currently generating about 0.01 per unit of volatility. If you would invest 1,534 in Jacquet Metal Service on August 28, 2024 and sell it today you would earn a total of 14.00 from holding Jacquet Metal Service or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. Jacquet Metal Service
Performance |
| Timeline |
| SIMS METAL MGT |
| Jacquet Metal Service |
SIMS METAL and Jacquet Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Jacquet Metal
The main advantage of trading using opposite SIMS METAL and Jacquet Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, Jacquet Metal 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 Jacquet Metal will offset losses from the drop in Jacquet Metal's long position.The idea behind SIMS METAL MGT and Jacquet Metal Service 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.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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