Correlation Between Sims Metal and BASF SE
Can any of the company-specific risk be diversified away by investing in both Sims Metal and BASF SE 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 BASF SE 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 BASF SE, you can compare the effects of market volatilities on Sims Metal and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and BASF SE.
Diversification Opportunities for Sims Metal and BASF SE
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sims and BASF is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Sims Metal i.e., Sims Metal and BASF SE go up and down completely randomly.
Pair Corralation between Sims Metal and BASF SE
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.2 times more return on investment than BASF SE. However, Sims Metal is 1.2 times more volatile than BASF SE. It trades about 0.11 of its potential returns per unit of risk. BASF SE is currently generating about -0.04 per unit of risk. If you would invest 765.00 in Sims Metal Management on September 5, 2024 and sell it today you would earn a total of 40.00 from holding Sims Metal Management or generate 5.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sims Metal Management vs. BASF SE
Performance |
| Timeline |
| Sims Metal Management |
| BASF SE |
Sims Metal and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and BASF SE
The main advantage of trading using opposite Sims Metal and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| Sims Metal vs. Tianjin Capital Environmental | Sims Metal vs. Perma Fix Environmental Services | Sims Metal vs. RELIANCE STEEL AL | Sims Metal vs. FORMPIPE SOFTWARE AB |
| BASF SE vs. CVS Health | BASF SE vs. TEXAS ROADHOUSE | BASF SE vs. Sims Metal Management | BASF SE vs. TITANIUM TRANSPORTGROUP |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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