Correlation Between Sims Metal and InterContinental
Can any of the company-specific risk be diversified away by investing in both Sims Metal and InterContinental 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 InterContinental 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 InterContinental Hotels Group, you can compare the effects of market volatilities on Sims Metal and InterContinental 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 InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and InterContinental.
Diversification Opportunities for Sims Metal and InterContinental
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sims and InterContinental is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Sims Metal i.e., Sims Metal and InterContinental go up and down completely randomly.
Pair Corralation between Sims Metal and InterContinental
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.63 times more return on investment than InterContinental. However, Sims Metal is 1.63 times more volatile than InterContinental Hotels Group. It trades about 0.35 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.18 per unit of risk. If you would invest 700.00 in Sims Metal Management on October 30, 2024 and sell it today you would earn a total of 95.00 from holding Sims Metal Management or generate 13.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. InterContinental Hotels Group
Performance |
| Timeline |
| Sims Metal Management |
| InterContinental Hotels |
Sims Metal and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and InterContinental
The main advantage of trading using opposite Sims Metal and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.| Sims Metal vs. Nucor | Sims Metal vs. ArcelorMittal SA | Sims Metal vs. ArcelorMittal | Sims Metal vs. Steel Dynamics |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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