Correlation Between SIMS METAL and Shionogi

Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Shionogi 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 Shionogi 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 Shionogi Co, you can compare the effects of market volatilities on SIMS METAL and Shionogi 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 Shionogi. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Shionogi.

Diversification Opportunities for SIMS METAL and Shionogi

-0.38

Correlation Coefficient

SIMS METAL  Shionogi

Very good diversification

The 3 months correlation between SIMS and Shionogi is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Shionogi Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shionogi 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 Shionogi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shionogi has no effect on the direction of SIMS METAL i.e., SIMS METAL and Shionogi go up and down completely randomly.

Pair Corralation between SIMS METAL and Shionogi

Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the Shionogi. In addition to that, SIMS METAL is 2.13 times more volatile than Shionogi Co. It trades about -0.3 of its total potential returns per unit of risk. Shionogi Co is currently generating about -0.11 per unit of volatility. If you would invest  1,360  in Shionogi Co on October 6, 2024 and sell it today you would lose (20.00) from holding Shionogi Co or give up 1.47% of portfolio value over 90 days.

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

SIMS METAL MGT  vs.  Shionogi Co

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.

Shionogi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Shionogi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SIMS METAL and Shionogi

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

The idea behind SIMS METAL MGT and Shionogi Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.