Correlation Between Sims Metal and Humana
Can any of the company-specific risk be diversified away by investing in both Sims Metal and Humana 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 Humana 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 Humana Inc, you can compare the effects of market volatilities on Sims Metal and Humana 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 Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and Humana.
Diversification Opportunities for Sims Metal and Humana
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sims and Humana is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc 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 Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Sims Metal i.e., Sims Metal and Humana go up and down completely randomly.
Pair Corralation between Sims Metal and Humana
Assuming the 90 days horizon Sims Metal Management is expected to under-perform the Humana. But the stock apears to be less risky and, when comparing its historical volatility, Sims Metal Management is 1.62 times less risky than Humana. The stock trades about -0.08 of its potential returns per unit of risk. The Humana Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 23,980 in Humana Inc on August 24, 2024 and sell it today you would earn a total of 3,800 from holding Humana Inc or generate 15.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sims Metal Management vs. Humana Inc
Performance |
| Timeline |
| Sims Metal Management |
| Humana Inc |
Sims Metal and Humana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and Humana
The main advantage of trading using opposite Sims Metal and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, Humana 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 Humana will offset losses from the drop in Humana's long position.| Sims Metal vs. ArcelorMittal SA | Sims Metal vs. ArcelorMittal | Sims Metal vs. Nippon Steel | Sims Metal vs. NIPPON STEEL SPADR |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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