Correlation Between Sims Metal and Nisshinbo Holdings
Can any of the company-specific risk be diversified away by investing in both Sims Metal and Nisshinbo Holdings 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 Nisshinbo Holdings 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 Nisshinbo Holdings, you can compare the effects of market volatilities on Sims Metal and Nisshinbo Holdings 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 Nisshinbo Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and Nisshinbo Holdings.
Diversification Opportunities for Sims Metal and Nisshinbo Holdings
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sims and Nisshinbo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Nisshinbo Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nisshinbo Holdings 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 Nisshinbo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nisshinbo Holdings has no effect on the direction of Sims Metal i.e., Sims Metal and Nisshinbo Holdings go up and down completely randomly.
Pair Corralation between Sims Metal and Nisshinbo Holdings
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.58 times more return on investment than Nisshinbo Holdings. However, Sims Metal is 1.58 times more volatile than Nisshinbo Holdings. It trades about 0.39 of its potential returns per unit of risk. Nisshinbo Holdings is currently generating about 0.14 per unit of risk. If you would invest 700.00 in Sims Metal Management on October 23, 2024 and sell it today you would earn a total of 100.00 from holding Sims Metal Management or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. Nisshinbo Holdings
Performance |
| Timeline |
| Sims Metal Management |
| Nisshinbo Holdings |
Sims Metal and Nisshinbo Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and Nisshinbo Holdings
The main advantage of trading using opposite Sims Metal and Nisshinbo Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, Nisshinbo Holdings 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 Nisshinbo Holdings will offset losses from the drop in Nisshinbo Holdings' long position.| Sims Metal vs. Nucor | Sims Metal vs. ArcelorMittal SA | Sims Metal vs. ArcelorMittal | Sims Metal vs. Steel Dynamics |
| Nisshinbo Holdings vs. Yanzhou Coal Mining | Nisshinbo Holdings vs. MCEWEN MINING INC | Nisshinbo Holdings vs. Globex Mining Enterprises | Nisshinbo Holdings vs. Sims Metal 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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