Correlation Between AP Mller and SITC International

Can any of the company-specific risk be diversified away by investing in both AP Mller and SITC 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 AP Mller and SITC International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Mller and SITC International Holdings, you can compare the effects of market volatilities on AP Mller and SITC 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 AP Mller with a short position of SITC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Mller and SITC International.

Diversification Opportunities for AP Mller and SITC International

0.23

Correlation Coefficient

AP Mller  SITC International

Modest diversification

The 3 months correlation between AMKBF and SITC is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding AP Mller and SITC International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SITC International and AP Mller 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 AP Mller are associated (or correlated) with SITC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SITC International has no effect on the direction of AP Mller i.e., AP Mller and SITC International go up and down completely randomly.

Pair Corralation between AP Mller and SITC International

Assuming the 90 days horizon AP Mller is expected to generate 1.25 times less return on investment than SITC International. But when comparing it to its historical volatility, AP Mller is 1.67 times less risky than SITC International. It trades about 0.06 of its potential returns per unit of risk. SITC International Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,390  in SITC International Holdings on December 28, 2024 and sell it today you would earn a total of  112.00  from holding SITC International Holdings or generate 4.69% return on investment over 90 days.

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

AP Mller   vs.  SITC International Holdings

AP Mller

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, AP Mller reported solid returns over the last few months and may actually be approaching a breakup point.

SITC International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SITC International Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, SITC International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Mller and SITC International

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

The idea behind AP Mller and SITC International Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.