Correlation Between DATANG INTL and SIMS METAL

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

By analyzing existing cross correlation between DATANG INTL POW and SIMS METAL MGT, you can compare the effects of market volatilities on DATANG INTL 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 DATANG INTL with a short position of SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATANG INTL and SIMS METAL.

Diversification Opportunities for DATANG INTL and SIMS METAL

0.12

Correlation Coefficient

DATANG INTL  SIMS METAL

Average diversification

The 3 months correlation between DATANG and SIMS is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding DATANG INTL POW and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT and DATANG INTL 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 DATANG INTL POW 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 MGT has no effect on the direction of DATANG INTL i.e., DATANG INTL and SIMS METAL go up and down completely randomly.

Pair Corralation between DATANG INTL and SIMS METAL

Assuming the 90 days trading horizon DATANG INTL POW is expected to generate 2.84 times more return on investment than SIMS METAL. However, DATANG INTL is 2.84 times more volatile than SIMS METAL MGT. It trades about 0.09 of its potential returns per unit of risk. SIMS METAL MGT is currently generating about -0.42 per unit of risk. If you would invest  16.00  in DATANG INTL POW on September 27, 2024 and sell it today you would earn a total of  1.00  from holding DATANG INTL POW or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DATANG INTL POW  vs.  SIMS METAL MGT

DATANG INTL POW

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DATANG INTL POW are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DATANG INTL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SIMS METAL MGT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMS METAL MGT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with DATANG INTL and SIMS METAL

The main advantage of trading using opposite DATANG INTL and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATANG INTL 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 DATANG INTL POW and SIMS METAL MGT 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.