Correlation Between Israel and Sika AG

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

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

Diversification Opportunities for Israel and Sika AG

-0.38

Correlation Coefficient

Israel  Sika AG

Very good diversification

The 3 months correlation between Israel and Sika is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Israel and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG and Israel 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 Israel 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 Israel i.e., Israel and Sika AG go up and down completely randomly.

Pair Corralation between Israel and Sika AG

Assuming the 90 days horizon Israel is expected to generate 4.82 times more return on investment than Sika AG. However, Israel is 4.82 times more volatile than Sika AG. It trades about 0.06 of its potential returns per unit of risk. Sika AG is currently generating about -0.11 per unit of risk. If you would invest  21,900  in Israel on October 21, 2024 and sell it today you would earn a total of  100.00  from holding Israel or generate 0.46% return on investment over 90 days.

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

Israel  vs.  Sika AG

Israel

Risk-Adjusted Performance

4 of 100

Insignificant

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

Sika AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sika AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Israel and Sika AG

The main advantage of trading using opposite Israel and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel 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 Israel 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.