Correlation Between EAT WELL and Sims Metal

Can any of the company-specific risk be diversified away by investing in both EAT WELL 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 EAT WELL and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EAT WELL INVESTMENT and Sims Metal Management, you can compare the effects of market volatilities on EAT WELL 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 EAT WELL with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAT WELL and Sims Metal.

Diversification Opportunities for EAT WELL and Sims Metal

0.0

Correlation Coefficient

EAT WELL  Sims Metal

Pay attention - limited upside

The 3 months correlation between EAT and Sims is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EAT WELL INVESTMENT 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 EAT WELL 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 EAT WELL INVESTMENT 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 EAT WELL i.e., EAT WELL and Sims Metal go up and down completely randomly.

Pair Corralation between EAT WELL and Sims Metal

If you would invest  700.00  in Sims Metal Management on December 25, 2024 and sell it today you would earn a total of  180.00  from holding Sims Metal Management or generate 25.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

EAT WELL INVESTMENT  vs.  Sims Metal Management

EAT WELL INVESTMENT

Risk-Adjusted Performance

Very Weak

Over the last 90 days EAT WELL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, EAT WELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sims Metal Management

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Sims Metal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EAT WELL and Sims Metal

The main advantage of trading using opposite EAT WELL and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAT WELL 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 EAT WELL INVESTMENT 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.

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.