Correlation Between Transport International and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Transport International and Sims Metal 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 Transport International and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transport International Holdings and Sims Metal Management, you can compare the effects of market volatilities on Transport International and Sims Metal 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 Transport International with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and Sims Metal.
Diversification Opportunities for Transport International and Sims Metal
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transport and Sims is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management and Transport International 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 Transport International Holdings are associated (or correlated) with Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Transport International i.e., Transport International and Sims Metal go up and down completely randomly.
Pair Corralation between Transport International and Sims Metal
Assuming the 90 days horizon Transport International is expected to generate 4.89 times less return on investment than Sims Metal. In addition to that, Transport International is 1.04 times more volatile than Sims Metal Management. It trades about 0.01 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.06 per unit of volatility. If you would invest 770.00 in Sims Metal Management on August 31, 2024 and sell it today you would earn a total of 20.00 from holding Sims Metal Management or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transport International Holdin vs. Sims Metal Management
Performance |
| Timeline |
| Transport International |
| Sims Metal Management |
Transport International and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transport International and Sims Metal
The main advantage of trading using opposite Transport International and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Transport International vs. Union Pacific | Transport International vs. Superior Plus Corp | Transport International vs. NMI Holdings | Transport International vs. Origin Agritech |
| Sims Metal vs. SALESFORCE INC CDR | Sims Metal vs. CARSALESCOM | Sims Metal vs. ADRIATIC METALS LS 013355 | Sims Metal vs. AAC TECHNOLOGHLDGADR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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