Correlation Between SIMS METAL and Equifax

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

Diversification Opportunities for SIMS METAL and Equifax

-0.07

Correlation Coefficient

SIMS METAL  Equifax

Good diversification

The 3 months correlation between SIMS and Equifax is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of SIMS METAL i.e., SIMS METAL and Equifax go up and down completely randomly.

Pair Corralation between SIMS METAL and Equifax

Assuming the 90 days trading horizon SIMS METAL is expected to generate 162.43 times less return on investment than Equifax. But when comparing it to its historical volatility, SIMS METAL MGT is 8.23 times less risky than Equifax. It trades about 0.0 of its potential returns per unit of risk. Equifax is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,952  in Equifax on September 28, 2024 and sell it today you would earn a total of  20,648  from holding Equifax or generate 522.47% return on investment over 90 days.

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

SIMS METAL MGT  vs.  Equifax

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 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.

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Equifax is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SIMS METAL and Equifax

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

The idea behind SIMS METAL MGT and Equifax 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.