Correlation Between SIMS METAL and Bank Of

Can any of the company-specific risk be diversified away by investing in both SIMS METAL and Bank Of 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 Bank Of 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 The Bank of, you can compare the effects of market volatilities on SIMS METAL and Bank Of 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 Bank Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and Bank Of.

Diversification Opportunities for SIMS METAL and Bank Of

0.32

Correlation Coefficient

SIMS METAL  Bank Of

Weak diversification

The 3 months correlation between SIMS and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Bank 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 Bank Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Bank has no effect on the direction of SIMS METAL i.e., SIMS METAL and Bank Of go up and down completely randomly.

Pair Corralation between SIMS METAL and Bank Of

Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the Bank Of. In addition to that, SIMS METAL is 1.54 times more volatile than The Bank of. It trades about -0.22 of its total potential returns per unit of risk. The Bank of is currently generating about -0.05 per unit of volatility. If you would invest  7,488  in The Bank of on September 22, 2024 and sell it today you would lose (98.00) from holding The Bank of or give up 1.31% of portfolio value over 90 days.

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

SIMS METAL MGT  vs.  The Bank of

SIMS METAL MGT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, SIMS METAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

The Bank

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with SIMS METAL and Bank Of

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

The idea behind SIMS METAL MGT and The Bank of 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.