Correlation Between SIERRA METALS and Adidas AG

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

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

Diversification Opportunities for SIERRA METALS and Adidas AG

0.24

Correlation Coefficient

SIERRA METALS  Adidas AG

Modest diversification

The 3 months correlation between SIERRA and Adidas is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and SIERRA METALS 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 SIERRA METALS are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and Adidas AG go up and down completely randomly.

Pair Corralation between SIERRA METALS and Adidas AG

Assuming the 90 days trading horizon SIERRA METALS is not expected to generate positive returns. Moreover, SIERRA METALS is 2.16 times more volatile than adidas AG. It trades away all of its potential returns to assume current level of volatility. adidas AG is currently generating about 0.11 per unit of risk. If you would invest  10,900  in adidas AG on October 22, 2024 and sell it today you would earn a total of  1,100  from holding adidas AG or generate 10.09% return on investment over 90 days.

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

SIERRA METALS  vs.  adidas AG

SIERRA METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

adidas AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Adidas AG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SIERRA METALS and Adidas AG

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

The idea behind SIERRA METALS and adidas 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.