Correlation Between Sims Metal and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both Sims Metal and MELIA HOTELS 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 MELIA HOTELS 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 MELIA HOTELS, you can compare the effects of market volatilities on Sims Metal and MELIA HOTELS 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 MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and MELIA HOTELS.
Diversification Opportunities for Sims Metal and MELIA HOTELS
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sims and MELIA is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA 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 MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of Sims Metal i.e., Sims Metal and MELIA HOTELS go up and down completely randomly.
Pair Corralation between Sims Metal and MELIA HOTELS
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.76 times more return on investment than MELIA HOTELS. However, Sims Metal is 1.76 times more volatile than MELIA HOTELS. It trades about 0.08 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.14 per unit of risk. If you would invest 775.00 in Sims Metal Management on August 30, 2024 and sell it today you would earn a total of 30.00 from holding Sims Metal Management or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sims Metal Management vs. MELIA HOTELS
Performance |
| Timeline |
| Sims Metal Management |
| MELIA HOTELS |
Sims Metal and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and MELIA HOTELS
The main advantage of trading using opposite Sims Metal and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, MELIA HOTELS 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 MELIA HOTELS will offset losses from the drop in MELIA HOTELS's long position.| Sims Metal vs. PSI Software AG | Sims Metal vs. MAGIC SOFTWARE ENTR | Sims Metal vs. BII Railway Transportation | Sims Metal vs. ATOSS SOFTWARE |
| MELIA HOTELS vs. Sims Metal Management | MELIA HOTELS vs. PROSIEBENSAT1 MEDIADR4 | MELIA HOTELS vs. CNVISION MEDIA | MELIA HOTELS vs. Waste Management |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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