Correlation Between SIMS METAL and BANK MANDIRI

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

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

Diversification Opportunities for SIMS METAL and BANK MANDIRI

0.43

Correlation Coefficient

SIMS METAL  BANK MANDIRI

Very weak diversification

The 3 months correlation between SIMS and BANK is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and BANK MANDIRI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK MANDIRI and SIMS METAL 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 SIMS METAL MGT are associated (or correlated) with BANK MANDIRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK MANDIRI has no effect on the direction of SIMS METAL i.e., SIMS METAL and BANK MANDIRI go up and down completely randomly.

Pair Corralation between SIMS METAL and BANK MANDIRI

Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 1.07 times more return on investment than BANK MANDIRI. However, SIMS METAL is 1.07 times more volatile than BANK MANDIRI. It trades about -0.3 of its potential returns per unit of risk. BANK MANDIRI is currently generating about -0.33 per unit of risk. If you would invest  795.00  in SIMS METAL MGT on October 6, 2024 and sell it today you would lose (70.00) from holding SIMS METAL MGT or give up 8.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

SIMS METAL MGT  vs.  BANK MANDIRI

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BANK MANDIRI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK MANDIRI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SIMS METAL and BANK MANDIRI

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

The idea behind SIMS METAL MGT and BANK MANDIRI 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.