Correlation Between SIMS METAL and Transport International

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

Diversification Opportunities for SIMS METAL and Transport International

0.59

Correlation Coefficient

SIMS METAL  Transport International

Very weak diversification

The 3 months correlation between SIMS and Transport is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport International 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 Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of SIMS METAL i.e., SIMS METAL and Transport International go up and down completely randomly.

Pair Corralation between SIMS METAL and Transport International

Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 1.16 times more return on investment than Transport International. However, SIMS METAL is 1.16 times more volatile than Transport International Holdings. It trades about 0.06 of its potential returns per unit of risk. Transport International Holdings is currently generating about 0.0 per unit of risk. If you would invest  706.00  in SIMS METAL MGT on September 19, 2024 and sell it today you would earn a total of  49.00  from holding SIMS METAL MGT or generate 6.94% 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.  Transport International Holdin

SIMS METAL MGT

Risk-Adjusted Performance

4 of 100

OK

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.

Transport International

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International 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 Transport International

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

The idea behind SIMS METAL MGT and Transport International Holdings 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.