Correlation Between Sims Metal and NH Foods
Can any of the company-specific risk be diversified away by investing in both Sims Metal and NH Foods 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 NH Foods 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 NH Foods, you can compare the effects of market volatilities on Sims Metal and NH Foods 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 NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and NH Foods.
Diversification Opportunities for Sims Metal and NH Foods
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sims and NI6 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and NH Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Sims Metal i.e., Sims Metal and NH Foods go up and down completely randomly.
Pair Corralation between Sims Metal and NH Foods
Assuming the 90 days horizon Sims Metal Management is expected to generate 0.94 times more return on investment than NH Foods. However, Sims Metal Management is 1.06 times less risky than NH Foods. It trades about 0.17 of its potential returns per unit of risk. NH Foods is currently generating about -0.19 per unit of risk. If you would invest 730.00 in Sims Metal Management on November 7, 2024 and sell it today you would earn a total of 55.00 from holding Sims Metal Management or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. NH Foods
Performance |
| Timeline |
| Sims Metal Management |
| NH Foods |
Sims Metal and NH Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and NH Foods
The main advantage of trading using opposite Sims Metal and NH Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, NH Foods 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 NH Foods will offset losses from the drop in NH Foods' long position.| Sims Metal vs. Cal Maine Foods | Sims Metal vs. Cognizant Technology Solutions | Sims Metal vs. Align Technology | Sims Metal vs. SMA Solar Technology |
| NH Foods vs. T Mobile | NH Foods vs. Air Lease | NH Foods vs. ecotel communication ag | NH Foods vs. MAVEN WIRELESS SWEDEN |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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