Correlation Between SIMS METAL and PARKEN Sport

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

Diversification Opportunities for SIMS METAL and PARKEN Sport

0.57

Correlation Coefficient

SIMS METAL  PARKEN Sport

Very weak diversification

The 3 months correlation between SIMS and PARKEN is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and PARKEN Sport Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARKEN Sport Enterta 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 PARKEN Sport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARKEN Sport Enterta has no effect on the direction of SIMS METAL i.e., SIMS METAL and PARKEN Sport go up and down completely randomly.

Pair Corralation between SIMS METAL and PARKEN Sport

Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 0.97 times more return on investment than PARKEN Sport. However, SIMS METAL MGT is 1.03 times less risky than PARKEN Sport. It trades about 0.15 of its potential returns per unit of risk. PARKEN Sport Entertainment is currently generating about 0.07 per unit of risk. If you would invest  646.00  in SIMS METAL MGT on September 12, 2024 and sell it today you would earn a total of  149.00  from holding SIMS METAL MGT or generate 23.07% 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.  PARKEN Sport Entertainment

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.

PARKEN Sport Enterta

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PARKEN Sport Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PARKEN Sport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SIMS METAL and PARKEN Sport

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

The idea behind SIMS METAL MGT and PARKEN Sport Entertainment 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.