Correlation Between Chuangs China and SIMS METAL

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

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

Diversification Opportunities for Chuangs China and SIMS METAL

-0.02

Correlation Coefficient

Chuangs China  SIMS METAL

Good diversification

The 3 months correlation between Chuangs and SIMS is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments 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 Chuangs China 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 Chuangs China Investments 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 Chuangs China i.e., Chuangs China and SIMS METAL go up and down completely randomly.

Pair Corralation between Chuangs China and SIMS METAL

Assuming the 90 days horizon Chuangs China Investments is expected to under-perform the SIMS METAL. In addition to that, Chuangs China is 2.56 times more volatile than SIMS METAL MGT. It trades about -0.01 of its total potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.0 per unit of volatility. If you would invest  821.00  in SIMS METAL MGT on September 26, 2024 and sell it today you would lose (116.00) from holding SIMS METAL MGT or give up 14.13% of portfolio value over 90 days.

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

Chuangs China Investments  vs.  SIMS METAL MGT

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

SIMS METAL MGT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMS METAL MGT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, SIMS METAL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chuangs China and SIMS METAL

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