Correlation Between Sims Metal and HEIA
Can any of the company-specific risk be diversified away by investing in both Sims Metal and HEIA 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 HEIA 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 HEIA, you can compare the effects of market volatilities on Sims Metal and HEIA 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 HEIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and HEIA.
Diversification Opportunities for Sims Metal and HEIA
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sims and HEIA is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and HEIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEIA 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 HEIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEIA has no effect on the direction of Sims Metal i.e., Sims Metal and HEIA go up and down completely randomly.
Pair Corralation between Sims Metal and HEIA
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.79 times more return on investment than HEIA. However, Sims Metal is 1.79 times more volatile than HEIA. It trades about 0.09 of its potential returns per unit of risk. HEIA is currently generating about 0.12 per unit of risk. If you would invest 642.00 in Sims Metal Management on September 3, 2024 and sell it today you would earn a total of 158.00 from holding Sims Metal Management or generate 24.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 57.36% |
| Values | Daily Returns |
Sims Metal Management vs. HEIA
Performance |
| Timeline |
| Sims Metal Management |
| HEIA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Sims Metal and HEIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and HEIA
The main advantage of trading using opposite Sims Metal and HEIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, HEIA 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 HEIA will offset losses from the drop in HEIA's long position.The idea behind Sims Metal Management and HEIA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| HEIA vs. GRIFFIN MINING LTD | HEIA vs. CarsalesCom | HEIA vs. Perseus Mining Limited | HEIA vs. YATRA ONLINE DL 0001 |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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