Correlation Between SIMS METAL and AP Mller

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

Diversification Opportunities for SIMS METAL and AP Mller

0.49

Correlation Coefficient

SIMS METAL  AP Mller

Very weak diversification

The 3 months correlation between SIMS and DP4A is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Mller 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 AP Mller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Mller has no effect on the direction of SIMS METAL i.e., SIMS METAL and AP Mller go up and down completely randomly.

Pair Corralation between SIMS METAL and AP Mller

Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.51 times less return on investment than AP Mller. But when comparing it to its historical volatility, SIMS METAL MGT is 1.62 times less risky than AP Mller. It trades about 0.16 of its potential returns per unit of risk. AP Mller is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  143,900  in AP Mller on April 25, 2025 and sell it today you would earn a total of  33,800  from holding AP Mller or generate 23.49% return on investment over 90 days.

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

SIMS METAL MGT  vs.  AP Mller

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, SIMS METAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

AP Mller

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AP Mller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMS METAL and AP Mller

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

The idea behind SIMS METAL MGT and AP Mller 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.