Correlation Between Sika AG and Sonova H

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

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

Diversification Opportunities for Sika AG and Sonova H

0.34

Correlation Coefficient

Sika AG  Sonova H

Weak diversification

The 3 months correlation between Sika and Sonova is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG and Sonova H Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonova H 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 Sonova H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonova H Ag has no effect on the direction of Sika AG i.e., Sika AG and Sonova H go up and down completely randomly.

Pair Corralation between Sika AG and Sonova H

Assuming the 90 days trading horizon Sika AG is expected to under-perform the Sonova H. But the stock apears to be less risky and, when comparing its historical volatility, Sika AG is 1.08 times less risky than Sonova H. The stock trades about 0.0 of its potential returns per unit of risk. The Sonova H Ag is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  22,356  in Sonova H Ag on November 20, 2024 and sell it today you would earn a total of  7,544  from holding Sonova H Ag or generate 33.74% return on investment over 90 days.

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

Sika AG  vs.  Sonova H Ag

Sika AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sika AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sika AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sonova H Ag

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sika AG and Sonova H

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

The idea behind Sika AG and Sonova H 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.