Correlation Between Sika AG and SGS SA
Can any of the company-specific risk be diversified away by investing in both Sika AG and SGS SA 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 Sika AG and SGS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sika AG and SGS SA, you can compare the effects of market volatilities on Sika AG and SGS SA 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 Sika AG with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and SGS SA.
Diversification Opportunities for Sika AG and SGS SA
Poor diversification
The 3 months correlation between Sika and SGS is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Sika AG 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 Sika AG are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Sika AG i.e., Sika AG and SGS SA go up and down completely randomly.
Pair Corralation between Sika AG and SGS SA
Assuming the 90 days trading horizon Sika AG is expected to generate 0.86 times more return on investment than SGS SA. However, Sika AG is 1.17 times less risky than SGS SA. It trades about -0.23 of its potential returns per unit of risk. SGS SA is currently generating about -0.27 per unit of risk. If you would invest 24,800 in Sika AG on August 25, 2024 and sell it today you would lose (1,660) from holding Sika AG or give up 6.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sika AG vs. SGS SA
Performance |
| Timeline |
| Sika AG |
| SGS SA |
Sika AG and SGS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sika AG and SGS SA
The main advantage of trading using opposite Sika AG and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika AG position performs unexpectedly, SGS SA 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 SGS SA will offset losses from the drop in SGS SA's long position.| Sika AG vs. Lonza Group AG | Sika AG vs. Givaudan SA | Sika AG vs. Geberit AG | Sika AG vs. Partners Group Holding |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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