Correlation Between THORNEY TECHS and Sims Metal
Can any of the company-specific risk be diversified away by investing in both THORNEY TECHS 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 THORNEY TECHS and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THORNEY TECHS LTD and Sims Metal Management, you can compare the effects of market volatilities on THORNEY TECHS 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 THORNEY TECHS with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and Sims Metal.
Diversification Opportunities for THORNEY TECHS and Sims Metal
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between THORNEY and Sims is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD 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 THORNEY TECHS 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 THORNEY TECHS LTD 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 THORNEY TECHS i.e., THORNEY TECHS and Sims Metal go up and down completely randomly.
Pair Corralation between THORNEY TECHS and Sims Metal
Assuming the 90 days horizon THORNEY TECHS LTD is expected to under-perform the Sims Metal. In addition to that, THORNEY TECHS is 1.78 times more volatile than Sims Metal Management. It trades about -0.13 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.02 per unit of volatility. If you would invest 760.00 in Sims Metal Management on September 16, 2024 and sell it today you would earn a total of 5.00 from holding Sims Metal Management or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
THORNEY TECHS LTD vs. Sims Metal Management
Performance |
| Timeline |
| THORNEY TECHS LTD |
| Sims Metal Management |
THORNEY TECHS and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THORNEY TECHS and Sims Metal
The main advantage of trading using opposite THORNEY TECHS and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THORNEY TECHS 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.| THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc |
| Sims Metal vs. BW OFFSHORE LTD | Sims Metal vs. Axcelis Technologies | Sims Metal vs. Uber Technologies | Sims Metal vs. THORNEY TECHS LTD |
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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