Correlation Between Sims Metal and Metso Outotec
Can any of the company-specific risk be diversified away by investing in both Sims Metal and Metso Outotec 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 Metso Outotec 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 Metso Outotec Oyj, you can compare the effects of market volatilities on Sims Metal and Metso Outotec 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 Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and Metso Outotec.
Diversification Opportunities for Sims Metal and Metso Outotec
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sims and Metso is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj 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 Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of Sims Metal i.e., Sims Metal and Metso Outotec go up and down completely randomly.
Pair Corralation between Sims Metal and Metso Outotec
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.09 times more return on investment than Metso Outotec. However, Sims Metal is 1.09 times more volatile than Metso Outotec Oyj. It trades about 0.01 of its potential returns per unit of risk. Metso Outotec Oyj is currently generating about 0.01 per unit of risk. If you would invest 804.00 in Sims Metal Management on September 5, 2024 and sell it today you would earn a total of 1.00 from holding Sims Metal Management or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sims Metal Management vs. Metso Outotec Oyj
Performance |
| Timeline |
| Sims Metal Management |
| Metso Outotec Oyj |
Sims Metal and Metso Outotec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and Metso Outotec
The main advantage of trading using opposite Sims Metal and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, Metso Outotec 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 Metso Outotec will offset losses from the drop in Metso Outotec's long position.| Sims Metal vs. Tianjin Capital Environmental | Sims Metal vs. Perma Fix Environmental Services | Sims Metal vs. RELIANCE STEEL AL | Sims Metal vs. FORMPIPE SOFTWARE AB |
| Metso Outotec vs. VOLVO B UNSPADR | Metso Outotec vs. Superior Plus Corp | Metso Outotec vs. NMI Holdings | Metso Outotec vs. Origin Agritech |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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