Correlation Between SIKA AG and PPG Industries

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

By analyzing existing cross correlation between SIKA AG UNSPADR and PPG Industries, you can compare the effects of market volatilities on SIKA AG and PPG Industries 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 PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIKA AG and PPG Industries.

Diversification Opportunities for SIKA AG and PPG Industries

-0.11

Correlation Coefficient

SIKA AG  PPG Industries

Good diversification

The 3 months correlation between SIKA and PPG is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SIKA AG UNSPADR and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 UNSPADR are associated (or correlated) with PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of SIKA AG i.e., SIKA AG and PPG Industries go up and down completely randomly.

Pair Corralation between SIKA AG and PPG Industries

Assuming the 90 days trading horizon SIKA AG UNSPADR is expected to generate 1.34 times more return on investment than PPG Industries. However, SIKA AG is 1.34 times more volatile than PPG Industries. It trades about 0.02 of its potential returns per unit of risk. PPG Industries is currently generating about 0.01 per unit of risk. If you would invest  2,121  in SIKA AG UNSPADR on September 23, 2024 and sell it today you would earn a total of  159.00  from holding SIKA AG UNSPADR or generate 7.5% return on investment over 90 days.

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

SIKA AG UNSPADR  vs.  PPG Industries

SIKA AG UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIKA AG UNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals 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.

PPG Industries

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PPG Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SIKA AG and PPG Industries

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

The idea behind SIKA AG UNSPADR and PPG Industries 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.