Correlation Between SIMS METAL and COLUMBIA SPORTSWEAR

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

Diversification Opportunities for SIMS METAL and COLUMBIA SPORTSWEAR

0.27

Correlation Coefficient

SIMS METAL  COLUMBIA SPORTSWEAR

Modest diversification

The 3 months correlation between SIMS and COLUMBIA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and COLUMBIA SPORTSWEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA SPORTSWEAR has no effect on the direction of SIMS METAL i.e., SIMS METAL and COLUMBIA SPORTSWEAR go up and down completely randomly.

Pair Corralation between SIMS METAL and COLUMBIA SPORTSWEAR

Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the COLUMBIA SPORTSWEAR. In addition to that, SIMS METAL is 1.42 times more volatile than COLUMBIA SPORTSWEAR. It trades about 0.0 of its total potential returns per unit of risk. COLUMBIA SPORTSWEAR is currently generating about 0.05 per unit of volatility. If you would invest  6,733  in COLUMBIA SPORTSWEAR on September 19, 2024 and sell it today you would earn a total of  1,767  from holding COLUMBIA SPORTSWEAR or generate 26.24% return on investment over 90 days.

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

SIMS METAL MGT  vs.  COLUMBIA SPORTSWEAR

SIMS METAL MGT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, SIMS METAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, COLUMBIA SPORTSWEAR unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMS METAL and COLUMBIA SPORTSWEAR

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

The idea behind SIMS METAL MGT and COLUMBIA SPORTSWEAR 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.