Correlation Between Australian Unity and Sims

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

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

Diversification Opportunities for Australian Unity and Sims

0.73

Correlation Coefficient

Australian Unity  Sims

Poor diversification

The 3 months correlation between Australian and Sims is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Australian Unity 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 Australian Unity Office 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 Australian Unity i.e., Australian Unity and Sims go up and down completely randomly.

Pair Corralation between Australian Unity and Sims

Assuming the 90 days trading horizon Australian Unity is expected to generate 11.41 times less return on investment than Sims. But when comparing it to its historical volatility, Australian Unity Office is 3.06 times less risky than Sims. It trades about 0.07 of its potential returns per unit of risk. Sims is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,181  in Sims on December 23, 2024 and sell it today you would earn a total of  361.00  from holding Sims or generate 30.57% return on investment over 90 days.

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

Australian Unity Office  vs.  Sims

Australian Unity Office

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Unity Office are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Australian Unity 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 20 (%) 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 Australian Unity and Sims

The main advantage of trading using opposite Australian Unity and Sims positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity 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 Australian Unity Office 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.