Correlation Between Sims Metal and ZURICH INSURANCE

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

Diversification Opportunities for Sims Metal and ZURICH INSURANCE

0.66

Correlation Coefficient

Sims Metal  ZURICH INSURANCE

Poor diversification

The 3 months correlation between Sims and ZURICH is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and ZURICH INSURANCE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZURICH INSURANCE 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 ZURICH INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZURICH INSURANCE has no effect on the direction of Sims Metal i.e., Sims Metal and ZURICH INSURANCE go up and down completely randomly.

Pair Corralation between Sims Metal and ZURICH INSURANCE

Assuming the 90 days horizon Sims Metal Management is expected to generate 1.26 times more return on investment than ZURICH INSURANCE. However, Sims Metal is 1.26 times more volatile than ZURICH INSURANCE GROUP. It trades about 0.23 of its potential returns per unit of risk. ZURICH INSURANCE GROUP is currently generating about 0.11 per unit of risk. If you would invest  695.00  in Sims Metal Management on December 21, 2024 and sell it today you would earn a total of  190.00  from holding Sims Metal Management or generate 27.34% 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.  ZURICH INSURANCE GROUP

Sims Metal Management

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sims Metal reported solid returns over the last few months and may actually be approaching a breakup point.

ZURICH INSURANCE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ZURICH INSURANCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sims Metal and ZURICH INSURANCE

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

The idea behind Sims Metal Management and ZURICH INSURANCE GROUP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.