Correlation Between Sims Metal and CHINA EDUCATION
Can any of the company-specific risk be diversified away by investing in both Sims Metal and CHINA EDUCATION 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 CHINA EDUCATION 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 CHINA EDUCATION GROUP, you can compare the effects of market volatilities on Sims Metal and CHINA EDUCATION 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 CHINA EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and CHINA EDUCATION.
Diversification Opportunities for Sims Metal and CHINA EDUCATION
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sims and CHINA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP 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 CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of Sims Metal i.e., Sims Metal and CHINA EDUCATION go up and down completely randomly.
Pair Corralation between Sims Metal and CHINA EDUCATION
Assuming the 90 days horizon Sims Metal Management is expected to under-perform the CHINA EDUCATION. But the stock apears to be less risky and, when comparing its historical volatility, Sims Metal Management is 2.1 times less risky than CHINA EDUCATION. The stock trades about -0.01 of its potential returns per unit of risk. The CHINA EDUCATION GROUP is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 37.00 in CHINA EDUCATION GROUP on October 13, 2024 and sell it today you would earn a total of 2.00 from holding CHINA EDUCATION GROUP or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. CHINA EDUCATION GROUP
Performance |
| Timeline |
| Sims Metal Management |
| CHINA EDUCATION GROUP |
Sims Metal and CHINA EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and CHINA EDUCATION
The main advantage of trading using opposite Sims Metal and CHINA EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, CHINA EDUCATION 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 CHINA EDUCATION will offset losses from the drop in CHINA EDUCATION's long position.| Sims Metal vs. China Resources Beer | Sims Metal vs. The Boston Beer | Sims Metal vs. Suntory Beverage Food | Sims Metal vs. GRENKELEASING Dusseldorf |
| CHINA EDUCATION vs. Brockhaus Capital Management | CHINA EDUCATION vs. Ares Management Corp | CHINA EDUCATION vs. TITAN MACHINERY | CHINA EDUCATION vs. Sims Metal Management |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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