Correlation Between SIKA AG and LyondellBasell Industries
Can any of the company-specific risk be diversified away by investing in both SIKA AG and LyondellBasell Industries 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 LyondellBasell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIKA AG UNSPADR and LyondellBasell Industries NV, you can compare the effects of market volatilities on SIKA AG and LyondellBasell Industries 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 LyondellBasell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIKA AG and LyondellBasell Industries.
Diversification Opportunities for SIKA AG and LyondellBasell Industries
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SIKA and LyondellBasell is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SIKA AG UNSPADR and LyondellBasell Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LyondellBasell Industries 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 UNSPADR are associated (or correlated) with LyondellBasell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LyondellBasell Industries has no effect on the direction of SIKA AG i.e., SIKA AG and LyondellBasell Industries go up and down completely randomly.
Pair Corralation between SIKA AG and LyondellBasell Industries
Assuming the 90 days trading horizon SIKA AG UNSPADR is expected to generate 1.03 times more return on investment than LyondellBasell Industries. However, SIKA AG is 1.03 times more volatile than LyondellBasell Industries NV. It trades about -0.02 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about -0.03 per unit of risk. If you would invest 2,607 in SIKA AG UNSPADR on August 27, 2024 and sell it today you would lose (187.00) from holding SIKA AG UNSPADR or give up 7.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIKA AG UNSPADR vs. LyondellBasell Industries NV
Performance |
| Timeline |
| SIKA AG UNSPADR |
| LyondellBasell Industries |
SIKA AG and LyondellBasell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIKA AG and LyondellBasell Industries
The main advantage of trading using opposite SIKA AG and LyondellBasell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIKA AG position performs unexpectedly, LyondellBasell Industries 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 LyondellBasell Industries will offset losses from the drop in LyondellBasell Industries' long position.| SIKA AG vs. NorAm Drilling AS | SIKA AG vs. STRAYER EDUCATION | SIKA AG vs. Grand Canyon Education | SIKA AG vs. EMBARK EDUCATION LTD |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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