Correlation Between Sims Metal and Global Industrial

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

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

Diversification Opportunities for Sims Metal and Global Industrial

0.0

Correlation Coefficient

Sims Metal  Global Industrial

Pay attention - limited upside

The 3 months correlation between Sims and Global is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Global Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Industrial and Sims Metal 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 Metal Management are associated (or correlated) with Global Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Industrial has no effect on the direction of Sims Metal i.e., Sims Metal and Global Industrial go up and down completely randomly.

Pair Corralation between Sims Metal and Global Industrial

If you would invest (100.00) in Sims Metal Management on November 28, 2024 and sell it today you would earn a total of  100.00  from holding Sims Metal Management or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sims Metal Management  vs.  Global Industrial Co

Sims Metal Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sims Metal Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Sims Metal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Global Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sims Metal and Global Industrial

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

The idea behind Sims Metal Management and Global Industrial Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.