Correlation Between SIMS METAL and Waste Management
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Waste Management 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 Waste Management 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 Waste Management, you can compare the effects of market volatilities on SIMS METAL and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Waste Management.
Diversification Opportunities for SIMS METAL and Waste Management
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SIMS and Waste is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of SIMS METAL i.e., SIMS METAL and Waste Management go up and down completely randomly.
Pair Corralation between SIMS METAL and Waste Management
Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.38 times less return on investment than Waste Management. In addition to that, SIMS METAL is 2.23 times more volatile than Waste Management. It trades about 0.11 of its total potential returns per unit of risk. Waste Management is currently generating about 0.33 per unit of volatility. If you would invest 19,802 in Waste Management on August 31, 2024 and sell it today you would earn a total of 1,818 from holding Waste Management or generate 9.18% 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. Waste Management
Performance |
| Timeline |
| SIMS METAL MGT |
| Waste Management |
SIMS METAL and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and Waste Management
The main advantage of trading using opposite SIMS METAL and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's 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 |
| Waste Management vs. Tsingtao Brewery | Waste Management vs. NISSIN FOODS HLDGS | Waste Management vs. TYSON FOODS A | Waste Management vs. National Beverage Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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