Correlation Between Indiana Resources and Sims

Can any of the company-specific risk be diversified away by investing in both Indiana Resources and Sims 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 Indiana Resources and Sims into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indiana Resources and Sims, you can compare the effects of market volatilities on Indiana Resources and Sims 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 Indiana Resources with a short position of Sims. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indiana Resources and Sims.

Diversification Opportunities for Indiana Resources and Sims

0.69

Correlation Coefficient

Indiana Resources  Sims

Poor diversification

The 3 months correlation between Indiana and Sims is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Indiana Resources and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Indiana Resources 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 Indiana Resources are associated (or correlated) with Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims has no effect on the direction of Indiana Resources i.e., Indiana Resources and Sims go up and down completely randomly.

Pair Corralation between Indiana Resources and Sims

Assuming the 90 days trading horizon Indiana Resources is expected to generate 1.0 times less return on investment than Sims. In addition to that, Indiana Resources is 1.27 times more volatile than Sims. It trades about 0.19 of its total potential returns per unit of risk. Sims is currently generating about 0.24 per unit of volatility. If you would invest  1,187  in Sims on December 29, 2024 and sell it today you would earn a total of  335.00  from holding Sims or generate 28.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Indiana Resources  vs.  Sims

Indiana Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indiana Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indiana Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sims

Risk-Adjusted Performance

Solid

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

Pair Trading with Indiana Resources and Sims

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

The idea behind Indiana Resources and Sims 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.