Correlation Between SIMS METAL and Public Storage

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

Diversification Opportunities for SIMS METAL and Public Storage

0.41

Correlation Coefficient

SIMS METAL  Public Storage

Very weak diversification

The 3 months correlation between SIMS and Public is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of SIMS METAL i.e., SIMS METAL and Public Storage go up and down completely randomly.

Pair Corralation between SIMS METAL and Public Storage

Assuming the 90 days trading horizon SIMS METAL MGT is expected to generate 1.34 times more return on investment than Public Storage. However, SIMS METAL is 1.34 times more volatile than Public Storage. It trades about -0.05 of its potential returns per unit of risk. Public Storage is currently generating about -0.09 per unit of risk. If you would invest  765.00  in SIMS METAL MGT on September 27, 2024 and sell it today you would lose (60.00) from holding SIMS METAL MGT or give up 7.84% of portfolio value over 90 days.

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

SIMS METAL MGT  vs.  Public Storage

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.

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SIMS METAL and Public Storage

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

The idea behind SIMS METAL MGT and Public Storage 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.