Correlation Between SIMS METAL and CARSALESCOM
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM, you can compare the effects of market volatilities on SIMS METAL and CARSALESCOM 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 CARSALESCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and CARSALESCOM.
Diversification Opportunities for SIMS METAL and CARSALESCOM
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SIMS and CARSALESCOM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of SIMS METAL i.e., SIMS METAL and CARSALESCOM go up and down completely randomly.
Pair Corralation between SIMS METAL and CARSALESCOM
Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 1.38 times more return on investment than CARSALESCOM. However, SIMS METAL is 1.38 times more volatile than CARSALESCOM. It trades about -0.04 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.15 per unit of risk. If you would invest 805.00 in SIMS METAL MGT on September 13, 2024 and sell it today you would lose (20.00) from holding SIMS METAL MGT or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIMS METAL MGT vs. CARSALESCOM
Performance |
| Timeline |
| SIMS METAL MGT |
| CARSALESCOM |
SIMS METAL and CARSALESCOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIMS METAL and CARSALESCOM
The main advantage of trading using opposite SIMS METAL and CARSALESCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, CARSALESCOM 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 CARSALESCOM will offset losses from the drop in CARSALESCOM's long position.The idea behind SIMS METAL MGT and CARSALESCOM 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.| CARSALESCOM vs. Apple Inc | CARSALESCOM vs. Apple Inc | CARSALESCOM vs. Apple Inc | CARSALESCOM vs. Apple Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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