Correlation Between Australia and Sims

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

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

Diversification Opportunities for Australia and Sims

0.11

Correlation Coefficient

Australia  Sims

Average diversification

The 3 months correlation between Australia and Sims is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Australia and New and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Australia 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 Australia and New are associated (or correlated) with Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims has no effect on the direction of Australia i.e., Australia and Sims go up and down completely randomly.

Pair Corralation between Australia and Sims

Assuming the 90 days trading horizon Australia is expected to generate 9.19 times less return on investment than Sims. But when comparing it to its historical volatility, Australia and New is 1.37 times less risky than Sims. It trades about 0.03 of its potential returns per unit of risk. Sims is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Sims on December 27, 2024 and sell it today you would earn a total of  328.00  from holding Sims or generate 27.59% return on investment over 90 days.

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

Australia and New  vs.  Sims

Australia and New

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australia and New are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sims

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sims are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Sims unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australia and Sims

The main advantage of trading using opposite Australia and Sims positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australia position performs unexpectedly, Sims 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 will offset losses from the drop in Sims' long position.

The idea behind Australia and New and Sims 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.