Correlation Between Sims Metal and CVW CLEANTECH
Can any of the company-specific risk be diversified away by investing in both Sims Metal and CVW CLEANTECH 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 CVW CLEANTECH 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 CVW CLEANTECH INC, you can compare the effects of market volatilities on Sims Metal and CVW CLEANTECH 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 CVW CLEANTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and CVW CLEANTECH.
Diversification Opportunities for Sims Metal and CVW CLEANTECH
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sims and CVW is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and CVW CLEANTECH INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CLEANTECH INC 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 CVW CLEANTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CLEANTECH INC has no effect on the direction of Sims Metal i.e., Sims Metal and CVW CLEANTECH go up and down completely randomly.
Pair Corralation between Sims Metal and CVW CLEANTECH
Assuming the 90 days horizon Sims Metal is expected to generate 19.97 times less return on investment than CVW CLEANTECH. But when comparing it to its historical volatility, Sims Metal Management is 2.21 times less risky than CVW CLEANTECH. It trades about 0.01 of its potential returns per unit of risk. CVW CLEANTECH INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 42.00 in CVW CLEANTECH INC on September 2, 2024 and sell it today you would earn a total of 14.00 from holding CVW CLEANTECH INC or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims Metal Management vs. CVW CLEANTECH INC
Performance |
| Timeline |
| Sims Metal Management |
| CVW CLEANTECH INC |
Sims Metal and CVW CLEANTECH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and CVW CLEANTECH
The main advantage of trading using opposite Sims Metal and CVW CLEANTECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, CVW CLEANTECH 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 CVW CLEANTECH will offset losses from the drop in CVW CLEANTECH's long position.The idea behind Sims Metal Management and CVW CLEANTECH INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CVW CLEANTECH vs. X FAB Silicon Foundries | CVW CLEANTECH vs. MAGIC SOFTWARE ENTR | CVW CLEANTECH vs. VITEC SOFTWARE GROUP | CVW CLEANTECH vs. PSI Software AG |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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