Correlation Between SIMS METAL and TRAVEL +

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

Diversification Opportunities for SIMS METAL and TRAVEL +

0.86

Correlation Coefficient

SIMS METAL  TRAVEL +

Very poor diversification

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

Pair Corralation between SIMS METAL and TRAVEL +

Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.58 times less return on investment than TRAVEL +. But when comparing it to its historical volatility, SIMS METAL MGT is 1.1 times less risky than TRAVEL +. It trades about 0.16 of its potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,836  in TRAVEL LEISURE DL 01 on April 25, 2025 and sell it today you would earn a total of  1,004  from holding TRAVEL LEISURE DL 01 or generate 26.17% 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.  TRAVEL LEISURE 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 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.

TRAVEL LEISURE DL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMS METAL and TRAVEL +

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

The idea behind SIMS METAL MGT and TRAVEL LEISURE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.