Correlation Between Sika AG and Air Products

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

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

Diversification Opportunities for Sika AG and Air Products

-0.76

Correlation Coefficient

Sika AG  Air Products

Pay attention - limited upside

The 3 months correlation between Sika and Air is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG ADR and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 ADR are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Sika AG i.e., Sika AG and Air Products go up and down completely randomly.

Pair Corralation between Sika AG and Air Products

Assuming the 90 days horizon Sika AG ADR is expected to under-perform the Air Products. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sika AG ADR is 1.19 times less risky than Air Products. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Air Products and is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  27,304  in Air Products and on September 4, 2024 and sell it today you would earn a total of  6,258  from holding Air Products and or generate 22.92% return on investment over 90 days.

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

Sika AG ADR  vs.  Air Products and

Sika AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sika AG ADR 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 strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Air Products

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sika AG and Air Products

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

The idea behind Sika AG ADR and Air Products and 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.