Correlation Between Sims and Australia

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

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

Diversification Opportunities for Sims and Australia

0.19

Correlation Coefficient

Sims  Australia

Average diversification

The 3 months correlation between Sims and Australia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sims and Australia and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia and New and Sims 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 are associated (or correlated) with Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia and New has no effect on the direction of Sims i.e., Sims and Australia go up and down completely randomly.

Pair Corralation between Sims and Australia

Assuming the 90 days trading horizon Sims is expected to generate 3.43 times less return on investment than Australia. In addition to that, Sims is 1.89 times more volatile than Australia and New. It trades about 0.01 of its total potential returns per unit of risk. Australia and New is currently generating about 0.09 per unit of volatility. If you would invest  2,106  in Australia and New on September 5, 2024 and sell it today you would earn a total of  1,065  from holding Australia and New or generate 50.57% return on investment over 90 days.

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

Sims  vs.  Australia and New

Sims

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sims are ranked lower than 13 (%) 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.

Australia and New

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australia and New are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sims and Australia

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

The idea behind Sims and Australia and New 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.