Correlation Between SIMS METAL and PLAYTIKA HOLDING

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

By analyzing existing cross correlation between SIMS METAL MGT and PLAYTIKA HOLDING DL 01, you can compare the effects of market volatilities on SIMS METAL and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and PLAYTIKA HOLDING.

Diversification Opportunities for SIMS METAL and PLAYTIKA HOLDING

0.45

Correlation Coefficient

SIMS METAL  PLAYTIKA HOLDING

Very weak diversification

The 3 months correlation between SIMS and PLAYTIKA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and PLAYTIKA HOLDING DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTIKA HOLDING 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 MGT are associated (or correlated) with PLAYTIKA HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTIKA HOLDING has no effect on the direction of SIMS METAL i.e., SIMS METAL and PLAYTIKA HOLDING go up and down completely randomly.

Pair Corralation between SIMS METAL and PLAYTIKA HOLDING

Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 1.11 times more return on investment than PLAYTIKA HOLDING. However, SIMS METAL is 1.11 times more volatile than PLAYTIKA HOLDING DL 01. It trades about 0.15 of its potential returns per unit of risk. PLAYTIKA HOLDING DL 01 is currently generating about 0.15 per unit of risk. If you would invest  637.00  in SIMS METAL MGT on September 14, 2024 and sell it today you would earn a total of  148.00  from holding SIMS METAL MGT or generate 23.23% return on investment over 90 days.

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

SIMS METAL MGT  vs.  PLAYTIKA HOLDING DL 01

SIMS METAL MGT

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, SIMS METAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

PLAYTIKA HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYTIKA HOLDING DL 01 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PLAYTIKA HOLDING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMS METAL and PLAYTIKA HOLDING

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

The idea behind SIMS METAL MGT and PLAYTIKA HOLDING DL 01 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.