Correlation Between SIMS METAL and DISTRICT METALS

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

Diversification Opportunities for SIMS METAL and DISTRICT METALS

0.34

Correlation Coefficient

SIMS METAL  DISTRICT METALS

Weak diversification

The 3 months correlation between SIMS and DISTRICT is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS 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 DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of SIMS METAL i.e., SIMS METAL and DISTRICT METALS go up and down completely randomly.

Pair Corralation between SIMS METAL and DISTRICT METALS

Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the DISTRICT METALS. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 2.31 times less risky than DISTRICT METALS. The stock trades about -0.05 of its potential returns per unit of risk. The DISTRICT METALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  23.00  in DISTRICT METALS on September 27, 2024 and sell it today you would earn a total of  1.00  from holding DISTRICT METALS or generate 4.35% 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.  DISTRICT METALS

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.

DISTRICT METALS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DISTRICT METALS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DISTRICT METALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SIMS METAL and DISTRICT METALS

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

The idea behind SIMS METAL MGT and DISTRICT METALS 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.