Correlation Between Sims Metal and IBEX Technologies

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

Diversification Opportunities for Sims Metal and IBEX Technologies

0.45

Correlation Coefficient

Sims Metal  IBEX Technologies

Very weak diversification

The 3 months correlation between Sims and IBEX is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and IBEX Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX Technologies 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 IBEX Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX Technologies has no effect on the direction of Sims Metal i.e., Sims Metal and IBEX Technologies go up and down completely randomly.

Pair Corralation between Sims Metal and IBEX Technologies

Assuming the 90 days horizon Sims Metal Management is expected to under-perform the IBEX Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Sims Metal Management is 21.16 times less risky than IBEX Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The IBEX Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  53.00  in IBEX Technologies on October 4, 2024 and sell it today you would earn a total of  68,147  from holding IBEX Technologies or generate 128579.25% return on investment over 90 days.

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

Sims Metal Management  vs.  IBEX Technologies

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

IBEX Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IBEX Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IBEX Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sims Metal and IBEX Technologies

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

The idea behind Sims Metal Management and IBEX Technologies 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.