Correlation Between SCIENCE IN and SIMS METAL

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

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

Diversification Opportunities for SCIENCE IN and SIMS METAL

0.36

Correlation Coefficient

SCIENCE IN  SIMS METAL

Weak diversification

The 3 months correlation between SCIENCE and SIMS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SCIENCE IN SPORT 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 SCIENCE IN 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 SCIENCE IN SPORT 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 SCIENCE IN i.e., SCIENCE IN and SIMS METAL go up and down completely randomly.

Pair Corralation between SCIENCE IN and SIMS METAL

Assuming the 90 days horizon SCIENCE IN is expected to generate 1.15 times less return on investment than SIMS METAL. In addition to that, SCIENCE IN is 1.34 times more volatile than SIMS METAL MGT. It trades about 0.07 of its total potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.1 per unit of volatility. If you would invest  656.00  in SIMS METAL MGT on September 18, 2024 and sell it today you would earn a total of  99.00  from holding SIMS METAL MGT or generate 15.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SCIENCE IN SPORT  vs.  SIMS METAL MGT

SCIENCE IN SPORT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCIENCE IN SPORT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SCIENCE IN reported solid returns over the last few months and may actually be approaching a breakup point.

SIMS METAL MGT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, SIMS METAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCIENCE IN and SIMS METAL

The main advantage of trading using opposite SCIENCE IN and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCIENCE IN 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 SCIENCE IN SPORT 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.