Correlation Between Sika AG and Croda International
Can any of the company-specific risk be diversified away by investing in both Sika AG and Croda International 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 Croda International 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 Croda International PLC, you can compare the effects of market volatilities on Sika AG and Croda International 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 Croda International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and Croda International.
Diversification Opportunities for Sika AG and Croda International
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sika and Croda is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG ADR and Croda International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croda International PLC 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 Croda International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croda International PLC has no effect on the direction of Sika AG i.e., Sika AG and Croda International go up and down completely randomly.
Pair Corralation between Sika AG and Croda International
Assuming the 90 days horizon Sika AG ADR is expected to under-perform the Croda International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sika AG ADR is 1.76 times less risky than Croda International. The pink sheet trades about -0.39 of its potential returns per unit of risk. The Croda International PLC is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 2,401 in Croda International PLC on August 29, 2024 and sell it today you would lose (155.00) from holding Croda International PLC or give up 6.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sika AG ADR vs. Croda International PLC
Performance |
| Timeline |
| Sika AG ADR |
| Croda International PLC |
Sika AG and Croda International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sika AG and Croda International
The main advantage of trading using opposite Sika AG and Croda International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika AG position performs unexpectedly, Croda International 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 Croda International will offset losses from the drop in Croda International's long position.The idea behind Sika AG ADR and Croda International PLC 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.| Croda International vs. PPG Industries | Croda International vs. Ecolab Inc | Croda International vs. Sherwin Williams Co | Croda International vs. Air Products and |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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