Correlation Between Sims Metal and DXC Technology
Can any of the company-specific risk be diversified away by investing in both Sims Metal and DXC Technology 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 DXC Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sims Metal Management and DXC Technology Co, you can compare the effects of market volatilities on Sims Metal and DXC Technology 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 DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and DXC Technology.
Diversification Opportunities for Sims Metal and DXC Technology
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sims and DXC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology 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 Management are associated (or correlated) with DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Sims Metal i.e., Sims Metal and DXC Technology go up and down completely randomly.
Pair Corralation between Sims Metal and DXC Technology
Assuming the 90 days horizon Sims Metal is expected to generate 18.6 times less return on investment than DXC Technology. But when comparing it to its historical volatility, Sims Metal Management is 1.28 times less risky than DXC Technology. It trades about 0.01 of its potential returns per unit of risk. DXC Technology Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,890 in DXC Technology Co on August 30, 2024 and sell it today you would earn a total of 217.00 from holding DXC Technology Co or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. DXC Technology Co
Performance |
| Timeline |
| Sims Metal Management |
| DXC Technology |
Sims Metal and DXC Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and DXC Technology
The main advantage of trading using opposite Sims Metal and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, DXC Technology 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 DXC Technology will offset losses from the drop in DXC Technology's long position.| Sims Metal vs. Steel Dynamics | Sims Metal vs. Superior Plus Corp | Sims Metal vs. SIVERS SEMICONDUCTORS AB | Sims Metal vs. Identiv |
| DXC Technology vs. Apple Inc | DXC Technology vs. Apple Inc | DXC Technology vs. Apple Inc | DXC Technology 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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