Correlation Between Sika AG and Orion Engineered
Can any of the company-specific risk be diversified away by investing in both Sika AG and Orion Engineered 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 Orion Engineered 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 Orion Engineered Carbons, you can compare the effects of market volatilities on Sika AG and Orion Engineered 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 Orion Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and Orion Engineered.
Diversification Opportunities for Sika AG and Orion Engineered
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sika and Orion is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG ADR and Orion Engineered Carbons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Engineered Carbons 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 Orion Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Engineered Carbons has no effect on the direction of Sika AG i.e., Sika AG and Orion Engineered go up and down completely randomly.
Pair Corralation between Sika AG and Orion Engineered
Assuming the 90 days horizon Sika AG ADR is expected to under-perform the Orion Engineered. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sika AG ADR is 2.84 times less risky than Orion Engineered. The pink sheet trades about -0.28 of its potential returns per unit of risk. The Orion Engineered Carbons is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,573 in Orion Engineered Carbons on August 24, 2024 and sell it today you would earn a total of 227.00 from holding Orion Engineered Carbons or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sika AG ADR vs. Orion Engineered Carbons
Performance |
| Timeline |
| Sika AG ADR |
| Orion Engineered Carbons |
Sika AG and Orion Engineered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sika AG and Orion Engineered
The main advantage of trading using opposite Sika AG and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika AG position performs unexpectedly, Orion Engineered 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 Orion Engineered will offset losses from the drop in Orion Engineered's long position.The idea behind Sika AG ADR and Orion Engineered Carbons 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.| Orion Engineered vs. Eshallgo Class A | Orion Engineered vs. Amtech Systems | Orion Engineered vs. Gold Fields Ltd | Orion Engineered 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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