Correlation Between Chemtrade Logistics and Sirona Biochem

Can any of the company-specific risk be diversified away by investing in both Chemtrade Logistics and Sirona Biochem 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 Chemtrade Logistics and Sirona Biochem into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Chemtrade Logistics and Sirona Biochem

0.22

Correlation Coefficient

Chemtrade Logistics  Sirona Biochem

Modest diversification

The 3 months correlation between Chemtrade and Sirona is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income and Sirona Biochem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sirona Biochem Corp and Chemtrade Logistics 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 Chemtrade Logistics Income are associated (or correlated) with Sirona Biochem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sirona Biochem Corp has no effect on the direction of Chemtrade Logistics i.e., Chemtrade Logistics and Sirona Biochem go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and Sirona Biochem

Assuming the 90 days trading horizon Chemtrade Logistics is expected to generate 9.12 times less return on investment than Sirona Biochem. But when comparing it to its historical volatility, Chemtrade Logistics Income is 7.21 times less risky than Sirona Biochem. It trades about 0.03 of its potential returns per unit of risk. Sirona Biochem Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Sirona Biochem Corp on October 23, 2024 and sell it today you would lose (4.00) from holding Sirona Biochem Corp or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chemtrade Logistics Income  vs.  Sirona Biochem Corp

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sirona Biochem Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sirona Biochem Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sirona Biochem showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chemtrade Logistics and Sirona Biochem

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

The idea behind Chemtrade Logistics Income and Sirona Biochem Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.