Correlation Between Sims Metal and Fastenal

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

Diversification Opportunities for Sims Metal and Fastenal

-0.79

Correlation Coefficient

Sims Metal  Fastenal

Pay attention - limited upside

The 3 months correlation between Sims and Fastenal is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Sims Metal i.e., Sims Metal and Fastenal go up and down completely randomly.

Pair Corralation between Sims Metal and Fastenal

If you would invest  1,030  in Sims Metal Management on March 16, 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	Weak
Accuracy	1.59%
Values	Daily Returns

Sims Metal Management  vs.  Fastenal Company

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.

Fastenal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fastenal Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sims Metal and Fastenal

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

The idea behind Sims Metal Management and Fastenal Company 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.