Correlation Between COMPUTERSHARE and Sims Metal

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

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

Diversification Opportunities for COMPUTERSHARE and Sims Metal

0.48

Correlation Coefficient

COMPUTERSHARE  Sims Metal

Very weak diversification

The 3 months correlation between COMPUTERSHARE and Sims is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding COMPUTERSHARE and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management and COMPUTERSHARE 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 COMPUTERSHARE are associated (or correlated) with Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of COMPUTERSHARE i.e., COMPUTERSHARE and Sims Metal go up and down completely randomly.

Pair Corralation between COMPUTERSHARE and Sims Metal

Assuming the 90 days trading horizon COMPUTERSHARE is expected to generate 3.14 times less return on investment than Sims Metal. In addition to that, COMPUTERSHARE is 1.21 times more volatile than Sims Metal Management. It trades about 0.05 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.2 per unit of volatility. If you would invest  785.00  in Sims Metal Management on April 23, 2025 and sell it today you would earn a total of  135.00  from holding Sims Metal Management or generate 17.2% return on investment over 90 days.

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

COMPUTERSHARE  vs.  Sims Metal Management

COMPUTERSHARE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, COMPUTERSHARE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 15 (%) 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.

Pair Trading with COMPUTERSHARE and Sims Metal

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

The idea behind COMPUTERSHARE and Sims Metal 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.