Correlation Between Sims Metal and Platinum Investment

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

Diversification Opportunities for Sims Metal and Platinum Investment

0.11

Correlation Coefficient

Sims Metal  Platinum Investment

Average diversification

The 3 months correlation between Sims and Platinum is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Platinum Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Investment 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 Platinum Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Investment has no effect on the direction of Sims Metal i.e., Sims Metal and Platinum Investment go up and down completely randomly.

Pair Corralation between Sims Metal and Platinum Investment

Assuming the 90 days horizon Sims Metal is expected to generate 1.13 times less return on investment than Platinum Investment. But when comparing it to its historical volatility, Sims Metal Management is 3.43 times less risky than Platinum Investment. It trades about 0.23 of its potential returns per unit of risk. Platinum Investment Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Platinum Investment Management on April 22, 2025 and sell it today you would earn a total of  5.00  from holding Platinum Investment Management or generate 16.67% return on investment over 90 days.

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

Sims Metal Management  vs.  Platinum Investment Management

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.

Platinum Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum Investment Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Platinum Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and Platinum Investment

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

The idea behind Sims Metal Management and Platinum Investment Management 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.