Correlation Between Sims Metal and BANK CENTRAL

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

By analyzing existing cross correlation between Sims Metal Management and BANK CENTRAL ASIA, you can compare the effects of market volatilities on Sims Metal and BANK CENTRAL 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 CENTRAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and BANK CENTRAL.

Diversification Opportunities for Sims Metal and BANK CENTRAL

0.29

Correlation Coefficient

Sims Metal  BANK CENTRAL

Modest diversification

The 3 months correlation between Sims and BANK is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and BANK CENTRAL ASIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CENTRAL ASIA 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 Management are associated (or correlated) with BANK CENTRAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CENTRAL ASIA has no effect on the direction of Sims Metal i.e., Sims Metal and BANK CENTRAL go up and down completely randomly.

Pair Corralation between Sims Metal and BANK CENTRAL

Assuming the 90 days horizon Sims Metal Management is expected to under-perform the BANK CENTRAL. In addition to that, Sims Metal is 1.82 times more volatile than BANK CENTRAL ASIA. It trades about -0.01 of its total potential returns per unit of risk. BANK CENTRAL ASIA is currently generating about 0.03 per unit of volatility. If you would invest  50.00  in BANK CENTRAL ASIA on October 4, 2024 and sell it today you would earn a total of  8.00  from holding BANK CENTRAL ASIA or generate 16.0% return on investment over 90 days.

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

Sims Metal Management  vs.  BANK CENTRAL ASIA

Sims Metal Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sims Metal Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BANK CENTRAL ASIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BANK CENTRAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sims Metal and BANK CENTRAL

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

The idea behind Sims Metal Management and BANK CENTRAL ASIA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.