Correlation Between Sims Metal and LL LUCKY

Can any of the company-specific risk be diversified away by investing in both Sims Metal and LL LUCKY 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 LL LUCKY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sims Metal Management and LL LUCKY GAMES, you can compare the effects of market volatilities on Sims Metal and LL LUCKY 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 LL LUCKY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims Metal and LL LUCKY.

Diversification Opportunities for Sims Metal and LL LUCKY

0.57

Correlation Coefficient

Sims Metal  LL LUCKY

Very weak diversification

The 3 months correlation between Sims and 7HH is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and LL LUCKY GAMES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LL LUCKY GAMES 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 Management are associated (or correlated) with LL LUCKY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LL LUCKY GAMES has no effect on the direction of Sims Metal i.e., Sims Metal and LL LUCKY go up and down completely randomly.

Pair Corralation between Sims Metal and LL LUCKY

Assuming the 90 days horizon Sims Metal is expected to generate 6.58 times less return on investment than LL LUCKY. But when comparing it to its historical volatility, Sims Metal Management is 3.43 times less risky than LL LUCKY. It trades about 0.01 of its potential returns per unit of risk. LL LUCKY GAMES is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8.90  in LL LUCKY GAMES on March 30, 2025 and sell it today you would lose (4.90) from holding LL LUCKY GAMES or give up 55.06% of portfolio value over 90 days.

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

Sims Metal Management  vs.  LL LUCKY GAMES

Sims Metal Management

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sims Metal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

LL LUCKY GAMES

Risk-Adjusted Performance

Very Weak

Over the last 90 days LL LUCKY GAMES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LL LUCKY is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sims Metal and LL LUCKY

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

The idea behind Sims Metal Management and LL LUCKY GAMES 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.