Correlation Between Sims Metal and AGF Management

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

Diversification Opportunities for Sims Metal and AGF Management

0.81

Correlation Coefficient

Sims Metal  AGF Management

Very poor diversification

The 3 months correlation between Sims and AGF is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Sims Metal i.e., Sims Metal and AGF Management go up and down completely randomly.

Pair Corralation between Sims Metal and AGF Management

Assuming the 90 days horizon Sims Metal Management is expected to generate 2.13 times more return on investment than AGF Management. However, Sims Metal is 2.13 times more volatile than AGF Management Limited. It trades about -0.03 of its potential returns per unit of risk. AGF Management Limited is currently generating about -0.09 per unit of risk. If you would invest  805.00  in Sims Metal Management on September 13, 2024 and sell it today you would lose (15.00) from holding Sims Metal Management or give up 1.86% of portfolio value over 90 days.

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

Sims Metal Management  vs.  AGF Management Limited

Sims Metal Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sims Metal reported solid returns over the last few months and may actually be approaching a breakup point.

AGF Management

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and AGF Management

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

The idea behind Sims Metal Management and AGF Management Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.