Correlation Between Sims Metal and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Sims Metal and DFS Furniture 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 DFS Furniture 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 DFS Furniture PLC, you can compare the effects of market volatilities on Sims Metal and DFS Furniture 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 DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and DFS Furniture.
Diversification Opportunities for Sims Metal and DFS Furniture
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sims and DFS is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of Sims Metal i.e., Sims Metal and DFS Furniture go up and down completely randomly.
Pair Corralation between Sims Metal and DFS Furniture
Assuming the 90 days horizon Sims Metal Management is expected to generate 0.77 times more return on investment than DFS Furniture. However, Sims Metal Management is 1.3 times less risky than DFS Furniture. It trades about 0.18 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about -0.15 per unit of risk. If you would invest 750.00 in Sims Metal Management on October 16, 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 Against |
| Strength | Insignificant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Sims Metal Management vs. DFS Furniture PLC
Performance |
| Timeline |
| Sims Metal Management |
| DFS Furniture PLC |
Sims Metal and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and DFS Furniture
The main advantage of trading using opposite Sims Metal and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, DFS Furniture 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 DFS Furniture will offset losses from the drop in DFS Furniture's long position.| Sims Metal vs. Jacquet Metal Service | Sims Metal vs. De Grey Mining | Sims Metal vs. Federal Agricultural Mortgage | Sims Metal vs. Dairy Farm International |
| DFS Furniture vs. Japan Tobacco | DFS Furniture vs. Siamgas And Petrochemicals | DFS Furniture vs. The Yokohama Rubber | DFS Furniture vs. SOLSTAD OFFSHORE NK |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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