Correlation Between Sims Metal and Sixt SE

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

Diversification Opportunities for Sims Metal and Sixt SE

0.85

Correlation Coefficient

Sims Metal  Sixt SE

Very poor diversification

The 3 months correlation between Sims and Sixt is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Sixt SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sixt SE 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 Sixt SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sixt SE has no effect on the direction of Sims Metal i.e., Sims Metal and Sixt SE go up and down completely randomly.

Pair Corralation between Sims Metal and Sixt SE

Assuming the 90 days horizon Sims Metal is expected to generate 1.35 times less return on investment than Sixt SE. But when comparing it to its historical volatility, Sims Metal Management is 1.16 times less risky than Sixt SE. It trades about 0.23 of its potential returns per unit of risk. Sixt SE is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  5,094  in Sixt SE on April 22, 2025 and sell it today you would earn a total of  1,446  from holding Sixt SE or generate 28.39% return on investment over 90 days.

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

Sims Metal Management  vs.  Sixt SE

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.

Sixt SE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sixt SE are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Sixt SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and Sixt SE

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

The idea behind Sims Metal Management and Sixt SE 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.