Correlation Between Sims Metal and Deutsche Post

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

Diversification Opportunities for Sims Metal and Deutsche Post

0.39

Correlation Coefficient

Sims Metal  Deutsche Post

Weak diversification

The 3 months correlation between Sims and Deutsche is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Deutsche Post AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Post AG 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 Deutsche Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Post AG has no effect on the direction of Sims Metal i.e., Sims Metal and Deutsche Post go up and down completely randomly.

Pair Corralation between Sims Metal and Deutsche Post

Assuming the 90 days horizon Sims Metal Management is expected to under-perform the Deutsche Post. In addition to that, Sims Metal is 2.06 times more volatile than Deutsche Post AG. It trades about -0.2 of its total potential returns per unit of risk. Deutsche Post AG is currently generating about -0.23 per unit of volatility. If you would invest  3,582  in Deutsche Post AG on October 9, 2024 and sell it today you would lose (143.00) from holding Deutsche Post AG or give up 3.99% of portfolio value over 90 days.

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

Sims Metal Management  vs.  Deutsche Post AG

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 nearly stable basic indicators, Sims Metal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Deutsche Post AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Post AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sims Metal and Deutsche Post

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

The idea behind Sims Metal Management and Deutsche Post AG 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 Stocks Directory module to find actively traded stocks across global markets.