Correlation Between Digilife Technologies and SIMS METAL

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

By analyzing existing cross correlation between Digilife Technologies Limited and SIMS METAL MGT, you can compare the effects of market volatilities on Digilife Technologies and SIMS METAL 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 Digilife Technologies with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digilife Technologies and SIMS METAL.

Diversification Opportunities for Digilife Technologies and SIMS METAL

-0.06

Correlation Coefficient

Digilife Technologies  SIMS METAL

Good diversification

The 3 months correlation between Digilife and SIMS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Digilife Technologies Limited and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT and Digilife Technologies 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 Digilife Technologies Limited are associated (or correlated) with SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of Digilife Technologies i.e., Digilife Technologies and SIMS METAL go up and down completely randomly.

Pair Corralation between Digilife Technologies and SIMS METAL

Assuming the 90 days trading horizon Digilife Technologies Limited is expected to under-perform the SIMS METAL. In addition to that, Digilife Technologies is 1.37 times more volatile than SIMS METAL MGT. It trades about -0.2 of its total potential returns per unit of risk. SIMS METAL MGT is currently generating about -0.03 per unit of volatility. If you would invest  770.00  in SIMS METAL MGT on September 18, 2024 and sell it today you would lose (15.00) from holding SIMS METAL MGT or give up 1.95% of portfolio value over 90 days.

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

Digilife Technologies Limited  vs.  SIMS METAL MGT

Digilife Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Digilife Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SIMS METAL MGT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, SIMS METAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digilife Technologies and SIMS METAL

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

The idea behind Digilife Technologies Limited and SIMS METAL MGT 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.