Correlation Between Sims Metal and CSSC Offshore

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

Diversification Opportunities for Sims Metal and CSSC Offshore

0.07

Correlation Coefficient

Sims Metal  CSSC Offshore

Significant diversification

The 3 months correlation between Sims and CSSC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine 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 CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of Sims Metal i.e., Sims Metal and CSSC Offshore go up and down completely randomly.

Pair Corralation between Sims Metal and CSSC Offshore

Assuming the 90 days horizon Sims Metal Management is expected to generate 0.97 times more return on investment than CSSC Offshore. However, Sims Metal Management is 1.03 times less risky than CSSC Offshore. It trades about 0.01 of its potential returns per unit of risk. CSSC Offshore Marine is currently generating about -0.11 per unit of risk. If you would invest  790.00  in Sims Metal Management on October 23, 2024 and sell it today you would earn a total of  0.00  from holding Sims Metal Management or generate 0.0% return on investment over 90 days.

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

Sims Metal Management  vs.  CSSC Offshore Marine

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

CSSC Offshore Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSSC Offshore Marine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sims Metal and CSSC Offshore

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

The idea behind Sims Metal Management and CSSC Offshore Marine 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.