Correlation Between SGS SA and American Diversified

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

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

Diversification Opportunities for SGS SA and American Diversified

-0.2

Correlation Coefficient

SGS SA  American Diversified

Good diversification

The 3 months correlation between SGS and American is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and American Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Diversified and SGS SA 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 SGS SA are associated (or correlated) with American Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Diversified has no effect on the direction of SGS SA i.e., SGS SA and American Diversified go up and down completely randomly.

Pair Corralation between SGS SA and American Diversified

Assuming the 90 days horizon SGS SA is expected to generate 0.15 times more return on investment than American Diversified. However, SGS SA is 6.88 times less risky than American Diversified. It trades about 0.0 of its potential returns per unit of risk. American Diversified Holdings is currently generating about -0.02 per unit of risk. If you would invest  999.00  in SGS SA on December 29, 2024 and sell it today you would lose (6.00) from holding SGS SA or give up 0.6% of portfolio value over 90 days.

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

SGS SA  vs.  American Diversified Holdings

SGS SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SGS SA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SGS SA and American Diversified

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

The idea behind SGS SA and American Diversified 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.