Correlation Between Sims and Light Wonder
Can any of the company-specific risk be diversified away by investing in both Sims and Light Wonder 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 Light Wonder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sims and Light Wonder, you can compare the effects of market volatilities on Sims and Light Wonder 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 Light Wonder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims and Light Wonder.
Diversification Opportunities for Sims and Light Wonder
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sims and Light is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sims and Light Wonder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Wonder 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 Light Wonder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Wonder has no effect on the direction of Sims i.e., Sims and Light Wonder go up and down completely randomly.
Pair Corralation between Sims and Light Wonder
Assuming the 90 days trading horizon Sims is expected to generate 0.71 times more return on investment than Light Wonder. However, Sims is 1.41 times less risky than Light Wonder. It trades about 0.24 of its potential returns per unit of risk. Light Wonder is currently generating about 0.12 per unit of risk. If you would invest 1,187 in Sims on December 28, 2024 and sell it today you would earn a total of 330.00 from holding Sims or generate 27.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.41% |
Values | Daily Returns |
Sims vs. Light Wonder
Performance |
Timeline |
Sims |
Light Wonder |
Sims and Light Wonder Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sims and Light Wonder
The main advantage of trading using opposite Sims and Light Wonder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims position performs unexpectedly, Light Wonder 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 Light Wonder will offset losses from the drop in Light Wonder's long position.Sims vs. Australian Strategic Materials | Sims vs. Iron Road | Sims vs. Beston Global Food | Sims vs. Aussie Broadband |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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