Correlation Between Sika AG and Air Liquide

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

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

Diversification Opportunities for Sika AG and Air Liquide

0.85

Correlation Coefficient

Sika AG  Air Liquide

Very poor diversification

The 3 months correlation between Sika and Air is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA 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 Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Sika AG i.e., Sika AG and Air Liquide go up and down completely randomly.

Pair Corralation between Sika AG and Air Liquide

Assuming the 90 days horizon Sika AG is expected to generate 1.77 times less return on investment than Air Liquide. In addition to that, Sika AG is 1.53 times more volatile than Air Liquide SA. It trades about 0.09 of its total potential returns per unit of risk. Air Liquide SA is currently generating about 0.24 per unit of volatility. If you would invest  3,241  in Air Liquide SA on December 27, 2024 and sell it today you would earn a total of  609.00  from holding Air Liquide SA or generate 18.79% return on investment over 90 days.

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

Sika AG  vs.  Air Liquide SA

Sika AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sika AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sika AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Air Liquide SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Air Liquide showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sika AG and Air Liquide

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

The idea behind Sika AG and Air Liquide SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.