Correlation Between Waste Management and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and SIMS METAL MGT, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and SIMS METAL.
Diversification Opportunities for Waste Management and SIMS METAL
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waste and SIMS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and SIMS METAL go up and down completely randomly.
Pair Corralation between Waste Management and SIMS METAL
Assuming the 90 days trading horizon Waste Management is expected to generate 0.45 times more return on investment than SIMS METAL. However, Waste Management is 2.23 times less risky than SIMS METAL. It trades about 0.33 of its potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.11 per unit of risk. If you would invest 19,802 in Waste Management on August 31, 2024 and sell it today you would earn a total of 1,818 from holding Waste Management or generate 9.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. SIMS METAL MGT
Performance |
| Timeline |
| Waste Management |
| SIMS METAL MGT |
Waste Management and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and SIMS METAL
The main advantage of trading using opposite Waste Management and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Tsingtao Brewery | Waste Management vs. NISSIN FOODS HLDGS | Waste Management vs. TYSON FOODS A | Waste Management vs. National Beverage Corp |
| SIMS METAL vs. SENECA FOODS A | SIMS METAL vs. Zijin Mining Group | SIMS METAL vs. LION ONE METALS | SIMS METAL vs. CAL MAINE FOODS |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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