Correlation Between Sims Metal and CSL
Can any of the company-specific risk be diversified away by investing in both Sims Metal and CSL 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 CSL 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 CSL LTD SPONADR, you can compare the effects of market volatilities on Sims Metal and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and CSL.
Diversification Opportunities for Sims Metal and CSL
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sims and CSL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of Sims Metal i.e., Sims Metal and CSL go up and down completely randomly.
Pair Corralation between Sims Metal and CSL
Assuming the 90 days horizon Sims Metal Management is expected to generate 2.36 times more return on investment than CSL. However, Sims Metal is 2.36 times more volatile than CSL LTD SPONADR. It trades about 0.18 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about 0.15 per unit of risk. If you would invest 750.00 in Sims Metal Management on October 15, 2024 and sell it today you would earn a total of 50.00 from holding Sims Metal Management or generate 6.67% 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. CSL LTD SPONADR
Performance |
| Timeline |
| Sims Metal Management |
| CSL LTD SPONADR |
Sims Metal and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and CSL
The main advantage of trading using opposite Sims Metal and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Sims Metal vs. Nucor | Sims Metal vs. Reliance Steel Aluminum | Sims Metal vs. Superior Plus Corp | Sims Metal vs. NMI Holdings |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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