Correlation Between Sidma SA and Thrace Plastics

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

By analyzing existing cross correlation between Sidma SA Steel and Thrace Plastics Holding, you can compare the effects of market volatilities on Sidma SA and Thrace Plastics 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 Sidma SA with a short position of Thrace Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sidma SA and Thrace Plastics.

Diversification Opportunities for Sidma SA and Thrace Plastics

0.23

Correlation Coefficient

Sidma SA  Thrace Plastics

Modest diversification

The 3 months correlation between Sidma and Thrace is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sidma SA Steel and Thrace Plastics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrace Plastics Holding and Sidma 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 Sidma SA Steel are associated (or correlated) with Thrace Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrace Plastics Holding has no effect on the direction of Sidma SA i.e., Sidma SA and Thrace Plastics go up and down completely randomly.

Pair Corralation between Sidma SA and Thrace Plastics

Assuming the 90 days trading horizon Sidma SA Steel is expected to generate 0.98 times more return on investment than Thrace Plastics. However, Sidma SA Steel is 1.02 times less risky than Thrace Plastics. It trades about -0.01 of its potential returns per unit of risk. Thrace Plastics Holding is currently generating about -0.03 per unit of risk. If you would invest  156.00  in Sidma SA Steel on December 2, 2024 and sell it today you would lose (2.00) from holding Sidma SA Steel or give up 1.28% of portfolio value over 90 days.

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

Sidma SA Steel  vs.  Thrace Plastics Holding

Sidma SA Steel

Risk-Adjusted Performance

Very Weak

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

Thrace Plastics Holding

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sidma SA and Thrace Plastics

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

The idea behind Sidma SA Steel and Thrace Plastics Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.