Correlation Between Asia Carbon and Sika AG

Can any of the company-specific risk be diversified away by investing in both Asia Carbon and Sika AG 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 Asia Carbon and Sika AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asia Carbon Industries and Sika AG, you can compare the effects of market volatilities on Asia Carbon and Sika AG 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 Asia Carbon with a short position of Sika AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Carbon and Sika AG.

Diversification Opportunities for Asia Carbon and Sika AG

0.0

Correlation Coefficient

Asia Carbon  Sika AG

Pay attention - limited upside

The 3 months correlation between Asia and Sika is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Asia Carbon Industries and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG and Asia Carbon 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 Asia Carbon Industries are associated (or correlated) with Sika AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sika AG has no effect on the direction of Asia Carbon i.e., Asia Carbon and Sika AG go up and down completely randomly.

Pair Corralation between Asia Carbon and Sika AG

If you would invest  23,558  in Sika AG on December 27, 2024 and sell it today you would earn a total of  2,212  from holding Sika AG or generate 9.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Asia Carbon Industries  vs.  Sika AG

Asia Carbon Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asia Carbon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Asia Carbon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sika AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sika AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sika AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Asia Carbon and Sika AG

The main advantage of trading using opposite Asia Carbon and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Carbon position performs unexpectedly, Sika AG 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 Sika AG will offset losses from the drop in Sika AG's long position.

The idea behind Asia Carbon Industries and Sika AG 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.

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.