Correlation Between Anheuser Busch and SIMS METAL

Can any of the company-specific risk be diversified away by investing in both Anheuser Busch 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 Anheuser Busch and SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anheuser Busch InBev SANV and SIMS METAL MGT, you can compare the effects of market volatilities on Anheuser Busch 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 Anheuser Busch with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and SIMS METAL.

Diversification Opportunities for Anheuser Busch and SIMS METAL

0.4

Correlation Coefficient

Anheuser Busch  SIMS METAL

Very weak diversification

The 3 months correlation between Anheuser and SIMS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV 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 Anheuser Busch 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 Anheuser Busch InBev SANV 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 Anheuser Busch i.e., Anheuser Busch and SIMS METAL go up and down completely randomly.

Pair Corralation between Anheuser Busch and SIMS METAL

Assuming the 90 days trading horizon Anheuser Busch InBev SANV is expected to under-perform the SIMS METAL. But the stock apears to be less risky and, when comparing its historical volatility, Anheuser Busch InBev SANV is 1.82 times less risky than SIMS METAL. The stock trades about -0.07 of its potential returns per unit of risk. The SIMS METAL MGT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  737.00  in SIMS METAL MGT on October 22, 2024 and sell it today you would earn a total of  73.00  from holding SIMS METAL MGT or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.56%
Values	Daily Returns

Anheuser Busch InBev SANV  vs.  SIMS METAL MGT

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SIMS METAL MGT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, SIMS METAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Anheuser Busch and SIMS METAL

The main advantage of trading using opposite Anheuser Busch and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch InBev SANV and SIMS METAL MGT 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.