Correlation Between PRECISION DRILLING and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both PRECISION DRILLING 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 PRECISION DRILLING and SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRECISION DRILLING P and SIMS METAL MGT, you can compare the effects of market volatilities on PRECISION DRILLING 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 PRECISION DRILLING with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and SIMS METAL.
Diversification Opportunities for PRECISION DRILLING and SIMS METAL
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PRECISION and SIMS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT and PRECISION DRILLING 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 PRECISION DRILLING P 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 MGT has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and SIMS METAL go up and down completely randomly.
Pair Corralation between PRECISION DRILLING and SIMS METAL
Assuming the 90 days trading horizon PRECISION DRILLING P is expected to under-perform the SIMS METAL. In addition to that, PRECISION DRILLING is 1.03 times more volatile than SIMS METAL MGT. It trades about -0.05 of its total potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.13 per unit of volatility. If you would invest 671.00 in SIMS METAL MGT on September 2, 2024 and sell it today you would earn a total of 139.00 from holding SIMS METAL MGT or generate 20.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRECISION DRILLING P vs. SIMS METAL MGT
Performance |
| Timeline |
| PRECISION DRILLING |
| SIMS METAL MGT |
PRECISION DRILLING and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRECISION DRILLING and SIMS METAL
The main advantage of trading using opposite PRECISION DRILLING and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRECISION DRILLING 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.| PRECISION DRILLING vs. SHELF DRILLING LTD | PRECISION DRILLING vs. Daldrup Shne Aktiengesellschaft | PRECISION DRILLING vs. Superior Plus Corp | PRECISION DRILLING vs. NMI Holdings |
| SIMS METAL vs. GFL ENVIRONM | SIMS METAL vs. Charter Communications | SIMS METAL vs. NIPPON STEEL SPADR | SIMS METAL vs. Entravision Communications |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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