Correlation Between Avoca LLC and Sika AG
Can any of the company-specific risk be diversified away by investing in both Avoca LLC 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 Avoca LLC and Sika AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avoca LLC and Sika AG ADR, you can compare the effects of market volatilities on Avoca LLC 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 Avoca LLC with a short position of Sika AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avoca LLC and Sika AG.
Diversification Opportunities for Avoca LLC and Sika AG
Significant diversification
The 3 months correlation between Avoca and Sika is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Avoca LLC 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 Avoca LLC 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 Avoca LLC 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 Avoca LLC i.e., Avoca LLC and Sika AG go up and down completely randomly.
Pair Corralation between Avoca LLC and Sika AG
Given the investment horizon of 90 days Avoca LLC is expected to generate 4.61 times more return on investment than Sika AG. However, Avoca LLC is 4.61 times more volatile than Sika AG ADR. It trades about 0.06 of its potential returns per unit of risk. Sika AG ADR is currently generating about -0.46 per unit of risk. If you would invest 116,600 in Avoca LLC on August 29, 2024 and sell it today you would earn a total of 10,900 from holding Avoca LLC or generate 9.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avoca LLC vs. Sika AG ADR
Performance |
| Timeline |
| Avoca LLC |
| Sika AG ADR |
Avoca LLC and Sika AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avoca LLC and Sika AG
The main advantage of trading using opposite Avoca LLC and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avoca LLC 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.| Avoca LLC vs. Yamaha Motor Co | Avoca LLC vs. Nitto Denko Corp | Avoca LLC vs. Farmers Merchants Bancorp | Avoca LLC vs. Furukawa Electric Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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