Correlation Between Sims Metal and TITANIUM TRANSPORTGROUP

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

Diversification Opportunities for Sims Metal and TITANIUM TRANSPORTGROUP

-0.65

Correlation Coefficient

Sims Metal  TITANIUM TRANSPORTGROUP

Excellent diversification

The 3 months correlation between Sims and TITANIUM is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and TITANIUM TRANSPORTGROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TITANIUM TRANSPORTGROUP 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 TITANIUM TRANSPORTGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TITANIUM TRANSPORTGROUP has no effect on the direction of Sims Metal i.e., Sims Metal and TITANIUM TRANSPORTGROUP go up and down completely randomly.

Pair Corralation between Sims Metal and TITANIUM TRANSPORTGROUP

Assuming the 90 days horizon Sims Metal Management is expected to generate 0.64 times more return on investment than TITANIUM TRANSPORTGROUP. However, Sims Metal Management is 1.57 times less risky than TITANIUM TRANSPORTGROUP. It trades about 0.06 of its potential returns per unit of risk. TITANIUM TRANSPORTGROUP is currently generating about -0.32 per unit of risk. If you would invest  760.00  in Sims Metal Management on December 11, 2024 and sell it today you would earn a total of  40.00  from holding Sims Metal Management or generate 5.26% return on investment over 90 days.

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

Sims Metal Management  vs.  TITANIUM TRANSPORTGROUP

Sims Metal Management

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sims Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TITANIUM TRANSPORTGROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days TITANIUM TRANSPORTGROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sims Metal and TITANIUM TRANSPORTGROUP

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

The idea behind Sims Metal Management and TITANIUM TRANSPORTGROUP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.