Correlation Between China Aircraft and Sims Metal

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

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

Diversification Opportunities for China Aircraft and Sims Metal

-0.82

Correlation Coefficient

China Aircraft  Sims Metal

Pay attention - limited upside

The 3 months correlation between China and Sims is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing 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 China Aircraft 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 China Aircraft Leasing 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 China Aircraft i.e., China Aircraft and Sims Metal go up and down completely randomly.

Pair Corralation between China Aircraft and Sims Metal

If you would invest  1,030  in Sims Metal Management on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Sims Metal Management or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

China Aircraft Leasing  vs.  Sims Metal Management

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sims Metal Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sims Metal Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Sims Metal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Aircraft and Sims Metal

The main advantage of trading using opposite China Aircraft and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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 China Aircraft Leasing 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.