Correlation Between Sims and Stelar Metals

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

By analyzing existing cross correlation between Sims and Stelar Metals, you can compare the effects of market volatilities on Sims and Stelar Metals 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 with a short position of Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims and Stelar Metals.

Diversification Opportunities for Sims and Stelar Metals

-0.35

Correlation Coefficient

Sims  Stelar Metals

Very good diversification

The 3 months correlation between Sims and Stelar is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sims and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals and Sims 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 are associated (or correlated) with Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Sims i.e., Sims and Stelar Metals go up and down completely randomly.

Pair Corralation between Sims and Stelar Metals

Assuming the 90 days trading horizon Sims is expected to generate 0.51 times more return on investment than Stelar Metals. However, Sims is 1.96 times less risky than Stelar Metals. It trades about 0.13 of its potential returns per unit of risk. Stelar Metals is currently generating about -0.02 per unit of risk. If you would invest  1,102  in Sims on September 14, 2024 and sell it today you would earn a total of  196.00  from holding Sims or generate 17.79% return on investment over 90 days.

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

Sims  vs.  Stelar Metals

Sims

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sims are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Sims unveiled solid returns over the last few months and may actually be approaching a breakup point.

Stelar Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stelar Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Stelar Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sims and Stelar Metals

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

The idea behind Sims and Stelar Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.