Correlation Between Sims Metal and DALATA HOTEL

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

Diversification Opportunities for Sims Metal and DALATA HOTEL

0.36

Correlation Coefficient

Sims Metal  DALATA HOTEL

Weak diversification

The 3 months correlation between Sims and DALATA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL 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 DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of Sims Metal i.e., Sims Metal and DALATA HOTEL go up and down completely randomly.

Pair Corralation between Sims Metal and DALATA HOTEL

Assuming the 90 days horizon Sims Metal Management is expected to generate 0.67 times more return on investment than DALATA HOTEL. However, Sims Metal Management is 1.5 times less risky than DALATA HOTEL. It trades about 0.13 of its potential returns per unit of risk. DALATA HOTEL is currently generating about 0.08 per unit of risk. If you would invest  656.00  in Sims Metal Management on September 13, 2024 and sell it today you would earn a total of  134.00  from holding Sims Metal Management or generate 20.43% 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.  DALATA HOTEL

Sims Metal Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sims Metal reported solid returns over the last few months and may actually be approaching a breakup point.

DALATA HOTEL

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DALATA HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and DALATA HOTEL

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

The idea behind Sims Metal Management and DALATA HOTEL 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.