Correlation Between Sims Metal and WillScot Mobile

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

Diversification Opportunities for Sims Metal and WillScot Mobile

0.79

Correlation Coefficient

Sims Metal  WillScot Mobile

Poor diversification

The 3 months correlation between Sims and WillScot is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and WillScot Mobile Mini in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WillScot Mobile Mini 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 WillScot Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WillScot Mobile Mini has no effect on the direction of Sims Metal i.e., Sims Metal and WillScot Mobile go up and down completely randomly.

Pair Corralation between Sims Metal and WillScot Mobile

Assuming the 90 days horizon Sims Metal is expected to generate 1.25 times less return on investment than WillScot Mobile. But when comparing it to its historical volatility, Sims Metal Management is 1.18 times less risky than WillScot Mobile. It trades about 0.07 of its potential returns per unit of risk. WillScot Mobile Mini is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,300  in WillScot Mobile Mini on November 19, 2024 and sell it today you would earn a total of  320.00  from holding WillScot Mobile Mini or generate 9.7% 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.  WillScot Mobile Mini

Sims Metal Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 5 (%) 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 March 2025.

WillScot Mobile Mini

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WillScot Mobile Mini are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WillScot Mobile may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Sims Metal and WillScot Mobile

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

The idea behind Sims Metal Management and WillScot Mobile Mini 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.