Correlation Between Brockhaus Capital and Sims Metal

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

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

Diversification Opportunities for Brockhaus Capital and Sims Metal

-0.46

Correlation Coefficient

Brockhaus Capital  Sims Metal

Very good diversification

The 3 months correlation between Brockhaus and Sims is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Brockhaus Capital Management 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 Brockhaus Capital 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 Brockhaus Capital Management 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 Brockhaus Capital i.e., Brockhaus Capital and Sims Metal go up and down completely randomly.

Pair Corralation between Brockhaus Capital and Sims Metal

Assuming the 90 days trading horizon Brockhaus Capital Management is expected to under-perform the Sims Metal. In addition to that, Brockhaus Capital is 1.88 times more volatile than Sims Metal Management. It trades about -0.11 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.2 per unit of volatility. If you would invest  695.00  in Sims Metal Management on December 30, 2024 and sell it today you would earn a total of  175.00  from holding Sims Metal Management or generate 25.18% return on investment over 90 days.

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

Brockhaus Capital Management  vs.  Sims Metal Management

Brockhaus Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brockhaus Capital Management 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 technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sims Metal Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sims Metal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brockhaus Capital and Sims Metal

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

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.