Correlation Between Sims Metal and AIR LIQUIDE

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

Diversification Opportunities for Sims Metal and AIR LIQUIDE

0.29

Correlation Coefficient

Sims Metal  AIR LIQUIDE

Modest diversification

The 3 months correlation between Sims and AIR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and AIR LIQUIDE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR LIQUIDE ADR 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 AIR LIQUIDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR LIQUIDE ADR has no effect on the direction of Sims Metal i.e., Sims Metal and AIR LIQUIDE go up and down completely randomly.

Pair Corralation between Sims Metal and AIR LIQUIDE

Assuming the 90 days horizon Sims Metal Management is expected to generate 1.07 times more return on investment than AIR LIQUIDE. However, Sims Metal is 1.07 times more volatile than AIR LIQUIDE ADR. It trades about 0.23 of its potential returns per unit of risk. AIR LIQUIDE ADR is currently generating about 0.04 per unit of risk. If you would invest  765.00  in Sims Metal Management on April 22, 2025 and sell it today you would earn a total of  155.00  from holding Sims Metal Management or generate 20.26% return on investment over 90 days.

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

Sims Metal Management  vs.  AIR LIQUIDE ADR

Sims Metal Management

Risk-Adjusted Performance

Solid

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

AIR LIQUIDE ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AIR LIQUIDE ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, AIR LIQUIDE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sims Metal and AIR LIQUIDE

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

The idea behind Sims Metal Management and AIR LIQUIDE ADR 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.