Correlation Between Sims Metal and CARSALESCOM
Can any of the company-specific risk be diversified away by investing in both Sims Metal and CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM, you can compare the effects of market volatilities on Sims Metal and CARSALESCOM 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 CARSALESCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and CARSALESCOM.
Diversification Opportunities for Sims Metal and CARSALESCOM
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sims and CARSALESCOM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Sims Metal i.e., Sims Metal and CARSALESCOM go up and down completely randomly.
Pair Corralation between Sims Metal and CARSALESCOM
Assuming the 90 days horizon Sims Metal Management is expected to under-perform the CARSALESCOM. In addition to that, Sims Metal is 1.61 times more volatile than CARSALESCOM. It trades about -0.07 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.37 per unit of volatility. If you would invest 2,280 in CARSALESCOM on August 27, 2024 and sell it today you would earn a total of 260.00 from holding CARSALESCOM or generate 11.4% 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. CARSALESCOM
Performance |
| Timeline |
| Sims Metal Management |
| CARSALESCOM |
Sims Metal and CARSALESCOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims Metal and CARSALESCOM
The main advantage of trading using opposite Sims Metal and CARSALESCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, CARSALESCOM 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 CARSALESCOM will offset losses from the drop in CARSALESCOM's long position.| Sims Metal vs. ArcelorMittal SA | Sims Metal vs. Nippon Steel | Sims Metal vs. NIPPON STEEL SPADR | Sims Metal vs. Reliance Steel Aluminum |
| CARSALESCOM vs. Xenia Hotels Resorts | CARSALESCOM vs. Dairy Farm International | CARSALESCOM vs. Choice Hotels International | CARSALESCOM vs. Host Hotels Resorts |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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