Correlation Between LyondellBasell Industries and Sika AG

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

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

Diversification Opportunities for LyondellBasell Industries and Sika AG

0.94

Correlation Coefficient

LyondellBasell Industries  Sika AG

Almost no diversification

The 3 months correlation between LyondellBasell and Sika is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG and LyondellBasell Industries 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 LyondellBasell Industries NV 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 LyondellBasell Industries i.e., LyondellBasell Industries and Sika AG go up and down completely randomly.

Pair Corralation between LyondellBasell Industries and Sika AG

Considering the 90-day investment horizon LyondellBasell Industries NV is expected to under-perform the Sika AG. But the stock apears to be less risky and, when comparing its historical volatility, LyondellBasell Industries NV is 2.25 times less risky than Sika AG. The stock trades about -0.23 of its potential returns per unit of risk. The Sika AG is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  30,776  in Sika AG on September 13, 2024 and sell it today you would lose (4,713) from holding Sika AG or give up 15.31% of portfolio value over 90 days.

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

LyondellBasell Industries NV  vs.  Sika AG

LyondellBasell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LyondellBasell Industries NV 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LyondellBasell Industries and Sika AG

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

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.