Correlation Between Sims Metal and EAT WELL

Can any of the company-specific risk be diversified away by investing in both Sims Metal and EAT WELL 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 EAT WELL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sims Metal Management and EAT WELL INVESTMENT, you can compare the effects of market volatilities on Sims Metal and EAT WELL 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 EAT WELL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and EAT WELL.

Diversification Opportunities for Sims Metal and EAT WELL

0.0

Correlation Coefficient

Sims Metal  EAT WELL

Pay attention - limited upside

The 3 months correlation between Sims and EAT is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and EAT WELL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAT WELL INVESTMENT 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 Management are associated (or correlated) with EAT WELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAT WELL INVESTMENT has no effect on the direction of Sims Metal i.e., Sims Metal and EAT WELL go up and down completely randomly.

Pair Corralation between Sims Metal and EAT WELL

Assuming the 90 days horizon Sims Metal Management is expected to under-perform the EAT WELL. But the stock apears to be less risky and, when comparing its historical volatility, Sims Metal Management is 1.37 times less risky than EAT WELL. The stock trades about -0.02 of its potential returns per unit of risk. The EAT WELL INVESTMENT is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  14.00  in EAT WELL INVESTMENT on September 27, 2024 and sell it today you would lose (3.00) from holding EAT WELL INVESTMENT or give up 21.43% of portfolio value over 90 days.

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

Sims Metal Management  vs.  EAT WELL INVESTMENT

Sims Metal Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sims Metal Management 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.

EAT WELL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EAT WELL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, EAT WELL 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 EAT WELL

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

The idea behind Sims Metal Management and EAT WELL INVESTMENT 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.