Correlation Between SIMS METAL and State Street

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

Diversification Opportunities for SIMS METAL and State Street

0.78

Correlation Coefficient

SIMS METAL  State Street

Poor diversification

The 3 months correlation between SIMS and State is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SIMS METAL MGT and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of SIMS METAL i.e., SIMS METAL and State Street go up and down completely randomly.

Pair Corralation between SIMS METAL and State Street

Assuming the 90 days trading horizon SIMS METAL is expected to generate 1.34 times less return on investment than State Street. But when comparing it to its historical volatility, SIMS METAL MGT is 1.03 times less risky than State Street. It trades about 0.16 of its potential returns per unit of risk. State Street is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,693  in State Street on April 25, 2025 and sell it today you would earn a total of  1,665  from holding State Street or generate 21.64% return on investment over 90 days.

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

SIMS METAL MGT  vs.  State Street

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.

State Street

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIMS METAL and State Street

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

The idea behind SIMS METAL MGT and State Street 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.