Correlation Between SIMS METAL and METTLER TOLEDO
Can any of the company-specific risk be diversified away by investing in both SIMS METAL and METTLER TOLEDO 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 METTLER TOLEDO 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 METTLER TOLEDO INTL, you can compare the effects of market volatilities on SIMS METAL and METTLER TOLEDO 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 METTLER TOLEDO. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and METTLER TOLEDO.
Diversification Opportunities for SIMS METAL and METTLER TOLEDO
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SIMS and METTLER is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and METTLER TOLEDO INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METTLER TOLEDO INTL 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 METTLER TOLEDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METTLER TOLEDO INTL has no effect on the direction of SIMS METAL i.e., SIMS METAL and METTLER TOLEDO go up and down completely randomly.
Pair Corralation between SIMS METAL and METTLER TOLEDO
Assuming the 90 days trading horizon SIMS METAL MGT is expected to under-perform the METTLER TOLEDO. But the stock apears to be less risky and, when comparing its historical volatility, SIMS METAL MGT is 1.15 times less risky than METTLER TOLEDO. The stock trades about -0.2 of its potential returns per unit of risk. The METTLER TOLEDO INTL is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 110,200 in METTLER TOLEDO INTL on February 19, 2024 and sell it today you would earn a total of 30,050 from holding METTLER TOLEDO INTL or generate 27.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SIMS METAL MGT vs. METTLER TOLEDO INTL
Performance |
Timeline |
SIMS METAL MGT |
METTLER TOLEDO INTL |
SIMS METAL and METTLER TOLEDO Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SIMS METAL and METTLER TOLEDO
The main advantage of trading using opposite SIMS METAL and METTLER TOLEDO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMS METAL position performs unexpectedly, METTLER TOLEDO 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 METTLER TOLEDO will offset losses from the drop in METTLER TOLEDO's long position.The idea behind SIMS METAL MGT and METTLER TOLEDO INTL 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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