Correlation Between Sims Metal and T Mobile

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

Diversification Opportunities for Sims Metal and T Mobile

0.33

Correlation Coefficient

Sims Metal  T Mobile

Weak diversification

The 3 months correlation between Sims and TM5 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Sims Metal i.e., Sims Metal and T Mobile go up and down completely randomly.

Pair Corralation between Sims Metal and T Mobile

Assuming the 90 days horizon Sims Metal Management is expected to generate 1.34 times more return on investment than T Mobile. However, Sims Metal is 1.34 times more volatile than T Mobile. It trades about -0.12 of its potential returns per unit of risk. T Mobile is currently generating about -0.2 per unit of risk. If you would invest  765.00  in Sims Metal Management on September 23, 2024 and sell it today you would lose (50.00) from holding Sims Metal Management or give up 6.54% of portfolio value over 90 days.

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

Sims Metal Management  vs.  T Mobile

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.

T Mobile

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, T Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and T Mobile

The main advantage of trading using opposite Sims Metal and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Sims Metal Management and T Mobile 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.