Correlation Between Falcon Metals and Sims

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

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

Diversification Opportunities for Falcon Metals and Sims

-0.74

Correlation Coefficient

Falcon Metals  Sims

Pay attention - limited upside

The 3 months correlation between Falcon and Sims is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Falcon Metals 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 Falcon Metals 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 Falcon Metals i.e., Falcon Metals and Sims go up and down completely randomly.

Pair Corralation between Falcon Metals and Sims

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Sims. In addition to that, Falcon Metals is 2.01 times more volatile than Sims. It trades about -0.13 of its total potential returns per unit of risk. Sims is currently generating about 0.15 per unit of volatility. If you would invest  1,078  in Sims on September 12, 2024 and sell it today you would earn a total of  229.00  from holding Sims or generate 21.24% return on investment over 90 days.

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

Falcon Metals  vs.  Sims

Falcon Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sims

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sims are ranked lower than 11 (%) 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 Falcon Metals and Sims

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

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.