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 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

-0.24

Correlation Coefficient

Sika AG  PPG Industries

Very good diversification

The 3 months correlation between Sika and PPG is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG 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 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 horizon Sika AG is expected to generate 1.14 times more return on investment than PPG Industries. However, Sika AG is 1.14 times more volatile than PPG Industries. It trades about 0.09 of its potential returns per unit of risk. PPG Industries is currently generating about -0.07 per unit of risk. If you would invest  23,552  in Sika AG on December 26, 2024 and sell it today you would earn a total of  2,218  from holding Sika AG or generate 9.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Sika AG  vs.  PPG Industries

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.

PPG Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.