Correlation Between Sika AG and LAir Liquide
Can any of the company-specific risk be diversified away by investing in both Sika AG and LAir Liquide 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 LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sika AG ADR and LAir Liquide SA, you can compare the effects of market volatilities on Sika AG and LAir Liquide 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 LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and LAir Liquide.
Diversification Opportunities for Sika AG and LAir Liquide
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sika and LAir is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG ADR and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide 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 ADR are associated (or correlated) with LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of Sika AG i.e., Sika AG and LAir Liquide go up and down completely randomly.
Pair Corralation between Sika AG and LAir Liquide
Assuming the 90 days horizon Sika AG ADR is expected to under-perform the LAir Liquide. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sika AG ADR is 1.08 times less risky than LAir Liquide. The pink sheet trades about 0.0 of its potential returns per unit of risk. The LAir Liquide SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 16,789 in LAir Liquide SA on August 27, 2024 and sell it today you would lose (90.00) from holding LAir Liquide SA or give up 0.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sika AG ADR vs. LAir Liquide SA
Performance |
| Timeline |
| Sika AG ADR |
| LAir Liquide SA |
Sika AG and LAir Liquide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sika AG and LAir Liquide
The main advantage of trading using opposite Sika AG and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika AG position performs unexpectedly, LAir Liquide 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 LAir Liquide will offset losses from the drop in LAir Liquide's long position.| Sika AG vs. First Graphene | Sika AG vs. HUMANA INC | Sika AG vs. Aquagold International | Sika AG vs. Barloworld Ltd ADR |
| LAir Liquide vs. First Graphene | LAir Liquide vs. HUMANA INC | LAir Liquide vs. Aquagold International | LAir Liquide vs. Barloworld Ltd ADR |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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