Correlation Between Sims Metal and Q2M Managementberatu

Can any of the company-specific risk be diversified away by investing in both Sims Metal and Q2M Managementberatu 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 Q2M Managementberatu 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 Q2M Managementberatung AG, you can compare the effects of market volatilities on Sims Metal and Q2M Managementberatu 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 Q2M Managementberatu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and Q2M Managementberatu.

Diversification Opportunities for Sims Metal and Q2M Managementberatu

0.62

Correlation Coefficient

Sims Metal  Q2M Managementberatu

Poor diversification

The 3 months correlation between Sims and Q2M is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Q2M Managementberatung AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q2M Managementberatung 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 Q2M Managementberatu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q2M Managementberatung has no effect on the direction of Sims Metal i.e., Sims Metal and Q2M Managementberatu go up and down completely randomly.

Pair Corralation between Sims Metal and Q2M Managementberatu

Assuming the 90 days horizon Sims Metal Management is expected to generate 5.0 times more return on investment than Q2M Managementberatu. However, Sims Metal is 5.0 times more volatile than Q2M Managementberatung AG. It trades about 0.05 of its potential returns per unit of risk. Q2M Managementberatung AG is currently generating about -0.15 per unit of risk. If you would invest  637.00  in Sims Metal Management on October 13, 2024 and sell it today you would earn a total of  98.00  from holding Sims Metal Management or generate 15.38% return on investment over 90 days.

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

Sims Metal Management  vs.  Q2M Managementberatung 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 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.

Q2M Managementberatung

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Q2M Managementberatung AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward 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 Q2M Managementberatu

The main advantage of trading using opposite Sims Metal and Q2M Managementberatu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, Q2M Managementberatu 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 Q2M Managementberatu will offset losses from the drop in Q2M Managementberatu's long position.

The idea behind Sims Metal Management and Q2M Managementberatung 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.