Correlation Between Sims Metal and DELCATH SYS

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

Diversification Opportunities for Sims Metal and DELCATH SYS

-0.11

Correlation Coefficient

Sims Metal  DELCATH SYS

Good diversification

The 3 months correlation between Sims and DELCATH is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and DELCATH SYS NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DELCATH SYS NEW 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 DELCATH SYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DELCATH SYS NEW has no effect on the direction of Sims Metal i.e., Sims Metal and DELCATH SYS go up and down completely randomly.

Pair Corralation between Sims Metal and DELCATH SYS

Assuming the 90 days horizon Sims Metal is expected to generate 10.55 times less return on investment than DELCATH SYS. But when comparing it to its historical volatility, Sims Metal Management is 1.89 times less risky than DELCATH SYS. It trades about 0.03 of its potential returns per unit of risk. DELCATH SYS NEW is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  975.00  in DELCATH SYS NEW on October 25, 2024 and sell it today you would earn a total of  445.00  from holding DELCATH SYS NEW or generate 45.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sims Metal Management  vs.  DELCATH SYS NEW

Sims Metal Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sims Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DELCATH SYS NEW

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DELCATH SYS NEW are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DELCATH SYS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and DELCATH SYS

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

The idea behind Sims Metal Management and DELCATH SYS NEW 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.