Correlation Between SIMS METAL and AMALGAMATED FIN

Can any of the company-specific risk be diversified away by investing in both SIMS METAL and AMALGAMATED FIN 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 AMALGAMATED FIN 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 AMALGAMATED FIN DL 01, you can compare the effects of market volatilities on SIMS METAL and AMALGAMATED FIN 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 AMALGAMATED FIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIMS METAL and AMALGAMATED FIN.

Diversification Opportunities for SIMS METAL and AMALGAMATED FIN

0.86

Correlation Coefficient

SIMS METAL  AMALGAMATED FIN

Very poor diversification

The 3 months correlation between SIMS and AMALGAMATED is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and AMALGAMATED FIN DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMALGAMATED FIN DL 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 AMALGAMATED FIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMALGAMATED FIN DL has no effect on the direction of SIMS METAL i.e., SIMS METAL and AMALGAMATED FIN go up and down completely randomly.

Pair Corralation between SIMS METAL and AMALGAMATED FIN

Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.65 times less return on investment than AMALGAMATED FIN. But when comparing it to its historical volatility, SIMS METAL MGT is 1.41 times less risky than AMALGAMATED FIN. It trades about 0.17 of its potential returns per unit of risk. AMALGAMATED FIN DL 01 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,200  in AMALGAMATED FIN DL 01 on April 22, 2025 and sell it today you would earn a total of  620.00  from holding AMALGAMATED FIN DL 01 or generate 28.18% return on investment over 90 days.

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

SIMS METAL MGT  vs.  AMALGAMATED FIN DL 01

SIMS METAL MGT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, SIMS METAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

AMALGAMATED FIN DL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMALGAMATED FIN DL 01 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, AMALGAMATED FIN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMS METAL and AMALGAMATED FIN

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

The idea behind SIMS METAL MGT and AMALGAMATED FIN DL 01 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.