Correlation Between Summit Resources and Sims

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

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

Diversification Opportunities for Summit Resources and Sims

0.03

Correlation Coefficient

Summit Resources  Sims

Significant diversification

The 3 months correlation between Summit and Sims is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Summit Resources Limited and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Summit 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 Summit Resources Limited 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 Summit Resources i.e., Summit Resources and Sims go up and down completely randomly.

Pair Corralation between Summit Resources and Sims

Assuming the 90 days trading horizon Summit Resources is expected to generate 1.28 times less return on investment than Sims. In addition to that, Summit Resources is 3.56 times more volatile than Sims. It trades about 0.05 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Summit Resources Limited  vs.  Sims

Summit Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Resources Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Summit 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 Summit Resources and Sims

The main advantage of trading using opposite Summit Resources and Sims positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit 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 Summit Resources Limited 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.

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