Correlation Between Sims Metal and WD-40 CO
Can any of the company-specific risk be diversified away by investing in both Sims Metal and WD-40 CO 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 WD-40 CO 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 WD 40 CO, you can compare the effects of market volatilities on Sims Metal and WD-40 CO 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 WD-40 CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and WD-40 CO.
Diversification Opportunities for Sims Metal and WD-40 CO
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sims and WD-40 is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and WD 40 CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 CO 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 WD-40 CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 CO has no effect on the direction of Sims Metal i.e., Sims Metal and WD-40 CO go up and down completely randomly.
Pair Corralation between Sims Metal and WD-40 CO
Assuming the 90 days horizon Sims Metal Management is expected to generate 1.25 times more return on investment than WD-40 CO. However, Sims Metal is 1.25 times more volatile than WD 40 CO. It trades about -0.11 of its potential returns per unit of risk. WD 40 CO is currently generating about -0.4 per unit of risk. If you would invest 765.00 in Sims Metal Management on October 12, 2024 and sell it today you would lose (30.00) from holding Sims Metal Management or give up 3.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Sims Metal Management vs. WD 40 CO
Performance |
| Timeline |
| Sims Metal Management |
| WD 40 CO |
Sims Metal and WD-40 CO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and WD-40 CO
The main advantage of trading using opposite Sims Metal and WD-40 CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, WD-40 CO 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 WD-40 CO will offset losses from the drop in WD-40 CO's long position.| Sims Metal vs. SEALED AIR | Sims Metal vs. Corsair Gaming | Sims Metal vs. TRADEDOUBLER AB SK | Sims Metal vs. ScanSource |
| WD-40 CO vs. Sims Metal Management | WD-40 CO vs. GEELY AUTOMOBILE | WD-40 CO vs. LANDSEA GREEN MANAGEMENT | WD-40 CO 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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