Correlation Between Sika AG and Loop Industries
Can any of the company-specific risk be diversified away by investing in both Sika AG and Loop 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 Loop Industries 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 Loop Industries, you can compare the effects of market volatilities on Sika AG and Loop 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 Loop Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and Loop Industries.
Diversification Opportunities for Sika AG and Loop Industries
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sika and Loop is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG ADR and Loop Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop 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 ADR are associated (or correlated) with Loop Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Industries has no effect on the direction of Sika AG i.e., Sika AG and Loop Industries go up and down completely randomly.
Pair Corralation between Sika AG and Loop Industries
Assuming the 90 days horizon Sika AG ADR is expected to generate 0.3 times more return on investment than Loop Industries. However, Sika AG ADR is 3.35 times less risky than Loop Industries. It trades about -0.28 of its potential returns per unit of risk. Loop Industries is currently generating about -0.11 per unit of risk. If you would invest 2,844 in Sika AG ADR on August 24, 2024 and sell it today you would lose (239.00) from holding Sika AG ADR or give up 8.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sika AG ADR vs. Loop Industries
Performance |
| Timeline |
| Sika AG ADR |
| Loop Industries |
Sika AG and Loop Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sika AG and Loop Industries
The main advantage of trading using opposite Sika AG and Loop Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika AG position performs unexpectedly, Loop 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 Loop Industries will offset losses from the drop in Loop Industries' long position.The idea behind Sika AG ADR and Loop Industries 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.| Loop Industries vs. Eshallgo Class A | Loop Industries vs. Amtech Systems | Loop Industries vs. Gold Fields Ltd | Loop Industries vs. Aegean Airlines SA |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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