Correlation Between SIMS METAL and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Liontown Resources 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 Liontown Resources 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 Liontown Resources Limited, you can compare the effects of market volatilities on SIMS METAL and Liontown Resources 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 Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Liontown Resources.
Diversification Opportunities for SIMS METAL and Liontown Resources
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SIMS and Liontown is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources 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 Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of SIMS METAL i.e., SIMS METAL and Liontown Resources go up and down completely randomly.
Pair Corralation between SIMS METAL and Liontown Resources
Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 0.91 times more return on investment than Liontown Resources. However, SIMS METAL MGT is 1.1 times less risky than Liontown Resources. It trades about 0.11 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about -0.19 per unit of risk. If you would invest 770.00 in SIMS METAL MGT on August 31, 2024 and sell it today you would earn a total of 45.00 from holding SIMS METAL MGT or generate 5.84% 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. Liontown Resources Limited
Performance |
| Timeline |
| SIMS METAL MGT |
| Liontown Resources |
SIMS METAL and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Liontown Resources
The main advantage of trading using opposite SIMS METAL and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, Liontown Resources 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 Liontown Resources will offset losses from the drop in Liontown Resources' long position.| SIMS METAL vs. SENECA FOODS A | SIMS METAL vs. Zijin Mining Group | SIMS METAL vs. LION ONE METALS | SIMS METAL vs. CAL MAINE FOODS |
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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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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