Correlation Between SEALED AIR and Sims Metal
Can any of the company-specific risk be diversified away by investing in both SEALED AIR 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 SEALED AIR and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEALED AIR and Sims Metal Management, you can compare the effects of market volatilities on SEALED AIR 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 SEALED AIR with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and Sims Metal.
Diversification Opportunities for SEALED AIR and Sims Metal
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SEALED and Sims is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR 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 SEALED AIR 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 SEALED AIR 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 SEALED AIR i.e., SEALED AIR and Sims Metal go up and down completely randomly.
Pair Corralation between SEALED AIR and Sims Metal
Assuming the 90 days trading horizon SEALED AIR is expected to under-perform the Sims Metal. But the stock apears to be less risky and, when comparing its historical volatility, SEALED AIR is 1.7 times less risky than Sims Metal. The stock trades about -0.34 of its potential returns per unit of risk. The Sims Metal Management is currently generating about -0.11 of returns per unit of risk over similar time horizon. 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 |
SEALED AIR vs. Sims Metal Management
Performance |
| Timeline |
| SEALED AIR |
| Sims Metal Management |
SEALED AIR and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEALED AIR and Sims Metal
The main advantage of trading using opposite SEALED AIR and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR 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.The idea behind SEALED AIR and Sims Metal Management 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.| Sims Metal vs. SEALED AIR | Sims Metal vs. Corsair Gaming | Sims Metal vs. TRADEDOUBLER AB SK | Sims Metal vs. ScanSource |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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