Correlation Between Sims Metal and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both Sims Metal and NIPPON STEEL 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 NIPPON STEEL 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 NIPPON STEEL SPADR, you can compare the effects of market volatilities on Sims Metal and NIPPON STEEL 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 NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and NIPPON STEEL.
Diversification Opportunities for Sims Metal and NIPPON STEEL
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sims and NIPPON is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of Sims Metal i.e., Sims Metal and NIPPON STEEL go up and down completely randomly.
Pair Corralation between Sims Metal and NIPPON STEEL
Assuming the 90 days horizon Sims Metal is expected to generate 4.75 times less return on investment than NIPPON STEEL. But when comparing it to its historical volatility, Sims Metal Management is 1.41 times less risky than NIPPON STEEL. It trades about 0.0 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 631.00 in NIPPON STEEL SPADR on September 14, 2024 and sell it today you would lose (16.00) from holding NIPPON STEEL SPADR or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| Sims Metal Management |
| NIPPON STEEL SPADR |
Sims Metal and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and NIPPON STEEL
The main advantage of trading using opposite Sims Metal and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, NIPPON STEEL 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 NIPPON STEEL will offset losses from the drop in NIPPON STEEL's long position.| Sims Metal vs. ArcelorMittal | Sims Metal vs. NIPPON STEEL SPADR | Sims Metal vs. Reliance Steel Aluminum | Sims Metal vs. Superior Plus Corp |
| NIPPON STEEL vs. ArcelorMittal | NIPPON STEEL vs. Reliance Steel Aluminum | NIPPON STEEL vs. Superior Plus Corp | NIPPON STEEL vs. SIVERS SEMICONDUCTORS AB |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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