Correlation Between Arkema SA and Sika AG
Can any of the company-specific risk be diversified away by investing in both Arkema SA and Sika AG 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 Arkema SA and Sika AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arkema SA ADR and Sika AG ADR, you can compare the effects of market volatilities on Arkema SA and Sika AG 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 Arkema SA with a short position of Sika AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arkema SA and Sika AG.
Diversification Opportunities for Arkema SA and Sika AG
Very poor diversification
The 3 months correlation between Arkema and Sika is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Arkema SA ADR and Sika AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG ADR and Arkema SA 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 Arkema SA ADR are associated (or correlated) with Sika AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sika AG ADR has no effect on the direction of Arkema SA i.e., Arkema SA and Sika AG go up and down completely randomly.
Pair Corralation between Arkema SA and Sika AG
Assuming the 90 days horizon Arkema SA ADR is expected to generate 1.48 times more return on investment than Sika AG. However, Arkema SA is 1.48 times more volatile than Sika AG ADR. It trades about 0.1 of its potential returns per unit of risk. Sika AG ADR is currently generating about 0.0 per unit of risk. If you would invest 8,185 in Arkema SA ADR on November 27, 2024 and sell it today you would earn a total of 327.00 from holding Arkema SA ADR or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arkema SA ADR vs. Sika AG ADR
Performance |
| Timeline |
| Arkema SA ADR |
| Sika AG ADR |
Arkema SA and Sika AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arkema SA and Sika AG
The main advantage of trading using opposite Arkema SA and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arkema SA position performs unexpectedly, Sika AG 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 Sika AG will offset losses from the drop in Sika AG's long position.| Arkema SA vs. Akzo Nobel NV | Arkema SA vs. Avoca LLC | Arkema SA vs. AGC Inc ADR | Arkema SA vs. AirBoss of America |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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