Correlation Between Sims Metal and Charter Communications
Can any of the company-specific risk be diversified away by investing in both Sims Metal and Charter Communications 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 Charter Communications 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 Charter Communications, you can compare the effects of market volatilities on Sims Metal and Charter Communications 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 Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and Charter Communications.
Diversification Opportunities for Sims Metal and Charter Communications
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sims and Charter is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Sims Metal i.e., Sims Metal and Charter Communications go up and down completely randomly.
Pair Corralation between Sims Metal and Charter Communications
Assuming the 90 days horizon Sims Metal is expected to generate 1.52 times less return on investment than Charter Communications. But when comparing it to its historical volatility, Sims Metal Management is 1.11 times less risky than Charter Communications. It trades about 0.1 of its potential returns per unit of risk. Charter Communications is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 34,575 in Charter Communications on September 3, 2024 and sell it today you would earn a total of 2,500 from holding Charter Communications or generate 7.23% 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. Charter Communications
Performance |
| Timeline |
| Sims Metal Management |
| Charter Communications |
Sims Metal and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and Charter Communications
The main advantage of trading using opposite Sims Metal and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, Charter Communications 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 Charter Communications will offset losses from the drop in Charter Communications' long position.| Sims Metal vs. ArcelorMittal | Sims Metal vs. Steel Dynamics | Sims Metal vs. NIPPON STEEL SPADR | Sims Metal vs. POSCO Holdings |
| Charter Communications vs. Playa Hotels Resorts | Charter Communications vs. NH HOTEL GROUP | Charter Communications vs. RYU Apparel | Charter Communications vs. Pebblebrook Hotel Trust |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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