Correlation Between Albemarle Corp and Sika AG

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

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

Diversification Opportunities for Albemarle Corp and Sika AG

-0.67

Correlation Coefficient

Albemarle Corp  Sika AG

Excellent diversification

The 3 months correlation between Albemarle and Sika is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle Corp and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG and Albemarle Corp 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 Albemarle Corp 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 Albemarle Corp i.e., Albemarle Corp and Sika AG go up and down completely randomly.

Pair Corralation between Albemarle Corp and Sika AG

Considering the 90-day investment horizon Albemarle Corp is expected to under-perform the Sika AG. In addition to that, Albemarle Corp is 1.44 times more volatile than Sika AG. It trades about -0.09 of its total potential returns per unit of risk. Sika AG is currently generating about 0.05 per unit of volatility. If you would invest  23,860  in Sika AG on December 28, 2024 and sell it today you would earn a total of  1,091  from holding Sika AG or generate 4.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Albemarle Corp  vs.  Sika AG

Albemarle Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Albemarle Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sika AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sika AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sika AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Albemarle Corp and Sika AG

The main advantage of trading using opposite Albemarle Corp and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle Corp 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 Albemarle Corp 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.

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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.