Correlation Between Sika AG and Clariant

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

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

Diversification Opportunities for Sika AG and Clariant

0.79

Correlation Coefficient

Sika AG  Clariant

Poor diversification

The 3 months correlation between Sika and Clariant is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG and Clariant AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clariant AG and Sika AG 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 Sika AG are associated (or correlated) with Clariant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clariant AG has no effect on the direction of Sika AG i.e., Sika AG and Clariant go up and down completely randomly.

Pair Corralation between Sika AG and Clariant

Assuming the 90 days trading horizon Sika AG is expected to generate 0.84 times more return on investment than Clariant. However, Sika AG is 1.19 times less risky than Clariant. It trades about -0.21 of its potential returns per unit of risk. Clariant AG is currently generating about -0.22 per unit of risk. If you would invest  27,280  in Sika AG on September 1, 2024 and sell it today you would lose (4,470) from holding Sika AG or give up 16.39% of portfolio value over 90 days.

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

Sika AG  vs.  Clariant AG

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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Clariant AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clariant AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Sika AG and Clariant

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

The idea behind Sika AG and Clariant 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.