Correlation Between Sims Metal and Strategic Investments
Can any of the company-specific risk be diversified away by investing in both Sims Metal and Strategic Investments 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 Strategic Investments 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 Strategic Investments AS, you can compare the effects of market volatilities on Sims Metal and Strategic Investments 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 Strategic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and Strategic Investments.
Diversification Opportunities for Sims Metal and Strategic Investments
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sims and Strategic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of Sims Metal i.e., Sims Metal and Strategic Investments go up and down completely randomly.
Pair Corralation between Sims Metal and Strategic Investments
Assuming the 90 days horizon Sims Metal Management is expected to under-perform the Strategic Investments. But the stock apears to be less risky and, when comparing its historical volatility, Sims Metal Management is 2.74 times less risky than Strategic Investments. The stock trades about 0.0 of its potential returns per unit of risk. The Strategic Investments AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9.15 in Strategic Investments AS on October 30, 2024 and sell it today you would earn a total of 3.85 from holding Strategic Investments AS or generate 42.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. Strategic Investments AS
Performance |
| Timeline |
| Sims Metal Management |
| Strategic Investments |
Sims Metal and Strategic Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and Strategic Investments
The main advantage of trading using opposite Sims Metal and Strategic Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, Strategic Investments 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 Strategic Investments will offset losses from the drop in Strategic Investments' long position.| Sims Metal vs. Nucor | Sims Metal vs. ArcelorMittal SA | Sims Metal vs. ArcelorMittal | Sims Metal vs. Steel Dynamics |
| Strategic Investments vs. Agilent Technologies | Strategic Investments vs. Silicon Motion Technology | Strategic Investments vs. GAZTRTECHNIUADR15EO01 | Strategic Investments vs. Sanyo Chemical Industries |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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