Correlation Between SHIP HEALTHCARE and Sims Metal
Can any of the company-specific risk be diversified away by investing in both SHIP HEALTHCARE 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 SHIP HEALTHCARE and Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SHIP HEALTHCARE HLDGINC and Sims Metal Management, you can compare the effects of market volatilities on SHIP HEALTHCARE 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 SHIP HEALTHCARE with a short position of Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIP HEALTHCARE and Sims Metal.
Diversification Opportunities for SHIP HEALTHCARE and Sims Metal
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SHIP and Sims is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SHIP HEALTHCARE HLDGINC 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 SHIP HEALTHCARE 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 SHIP HEALTHCARE HLDGINC 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 SHIP HEALTHCARE i.e., SHIP HEALTHCARE and Sims Metal go up and down completely randomly.
Pair Corralation between SHIP HEALTHCARE and Sims Metal
Assuming the 90 days horizon SHIP HEALTHCARE HLDGINC is expected to generate 1.33 times more return on investment than Sims Metal. However, SHIP HEALTHCARE is 1.33 times more volatile than Sims Metal Management. It trades about 0.02 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.0 per unit of risk. If you would invest 1,136 in SHIP HEALTHCARE HLDGINC on September 26, 2024 and sell it today you would earn a total of 194.00 from holding SHIP HEALTHCARE HLDGINC or generate 17.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SHIP HEALTHCARE HLDGINC vs. Sims Metal Management
Performance |
Timeline |
SHIP HEALTHCARE HLDGINC |
Sims Metal Management |
SHIP HEALTHCARE and Sims Metal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SHIP HEALTHCARE and Sims Metal
The main advantage of trading using opposite SHIP HEALTHCARE and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIP HEALTHCARE 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.SHIP HEALTHCARE vs. United Airlines Holdings | SHIP HEALTHCARE vs. Aegean Airlines SA | SHIP HEALTHCARE vs. Fast Retailing Co | SHIP HEALTHCARE vs. BJs Wholesale Club |
Sims Metal vs. SHIP HEALTHCARE HLDGINC | Sims Metal vs. HEALTHCARE REAL A | Sims Metal vs. Major Drilling Group | Sims Metal vs. American Airlines Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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