Correlation Between Alto Metals and Sims

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

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

Diversification Opportunities for Alto Metals and Sims

-0.26

Correlation Coefficient

Alto Metals  Sims

Very good diversification

The 3 months correlation between Alto and Sims is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Alto Metals and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Alto Metals 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 Alto Metals 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 Alto Metals i.e., Alto Metals and Sims go up and down completely randomly.

Pair Corralation between Alto Metals and Sims

Assuming the 90 days trading horizon Alto Metals is expected to generate 1.88 times more return on investment than Sims. However, Alto Metals is 1.88 times more volatile than Sims. It trades about 0.2 of its potential returns per unit of risk. Sims is currently generating about -0.02 per unit of risk. If you would invest  6.80  in Alto Metals on September 26, 2024 and sell it today you would earn a total of  2.60  from holding Alto Metals or generate 38.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.5%
Values	Daily Returns

Alto Metals  vs.  Sims

Alto Metals

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Alto Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain technical and fundamental indicators, Alto Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sims

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alto Metals and Sims

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

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.