Correlation Between Sika AG and LyondellBasell Industries

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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 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

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Sika and LyondellBasell is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG 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 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 horizon Sika AG is expected to generate 2.05 times more return on investment than LyondellBasell Industries. However, Sika AG is 2.05 times more volatile than LyondellBasell Industries NV. It trades about 0.01 of its potential returns per unit of risk. LyondellBasell Industries NV is currently generating about 0.01 per unit of risk. If you would invest  26,801  in Sika AG on September 1, 2024 and sell it today you would lose (1,394) from holding Sika AG or give up 5.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Sika AG  vs.  LyondellBasell Industries NV

 Performance 
       Timeline  
Sika AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sika AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
LyondellBasell Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LyondellBasell Industries NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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.
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The idea behind Sika AG and LyondellBasell Industries NV 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.
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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