Correlation Between YAMAHA MOTOR and Sims Metal

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

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

Diversification Opportunities for YAMAHA MOTOR and Sims Metal

-0.3

Correlation Coefficient

YAMAHA MOTOR  Sims Metal

Very good diversification

The 3 months correlation between YAMAHA and Sims is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding YAMAHA MOTOR and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management and YAMAHA MOTOR 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 YAMAHA MOTOR 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 Management has no effect on the direction of YAMAHA MOTOR i.e., YAMAHA MOTOR and Sims Metal go up and down completely randomly.

Pair Corralation between YAMAHA MOTOR and Sims Metal

Assuming the 90 days trading horizon YAMAHA MOTOR is expected to generate 0.83 times more return on investment than Sims Metal. However, YAMAHA MOTOR is 1.21 times less risky than Sims Metal. It trades about 0.02 of its potential returns per unit of risk. Sims Metal Management is currently generating about -0.01 per unit of risk. If you would invest  713.00  in YAMAHA MOTOR on October 12, 2024 and sell it today you would earn a total of  83.00  from holding YAMAHA MOTOR or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

YAMAHA MOTOR  vs.  Sims Metal Management

YAMAHA MOTOR

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days YAMAHA MOTOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, YAMAHA MOTOR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sims Metal Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sims Metal Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with YAMAHA MOTOR and Sims Metal

The main advantage of trading using opposite YAMAHA MOTOR and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YAMAHA MOTOR 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 YAMAHA MOTOR and Sims Metal Management 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.