Correlation Between Sika AG and InMed Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Sika AG and InMed Pharmaceuticals 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 InMed Pharmaceuticals 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 InMed Pharmaceuticals, you can compare the effects of market volatilities on Sika AG and InMed Pharmaceuticals 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 InMed Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and InMed Pharmaceuticals.

Diversification Opportunities for Sika AG and InMed Pharmaceuticals

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between SXYAY and InMed is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG ADR and InMed Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMed Pharmaceuticals 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 InMed Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InMed Pharmaceuticals has no effect on the direction of Sika AG i.e., Sika AG and InMed Pharmaceuticals go up and down completely randomly.

Pair Corralation between Sika AG and InMed Pharmaceuticals

Assuming the 90 days horizon Sika AG ADR is expected to generate 0.35 times more return on investment than InMed Pharmaceuticals. However, Sika AG ADR is 2.85 times less risky than InMed Pharmaceuticals. It trades about 0.2 of its potential returns per unit of risk. InMed Pharmaceuticals is currently generating about 0.02 per unit of risk. If you would invest  2,188  in Sika AG ADR on September 3, 2022 and sell it today you would earn a total of  381.00  from holding Sika AG ADR or generate 17.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sika AG ADR  vs.  InMed Pharmaceuticals

 Performance (%) 
       Timeline  
Sika AG ADR 
SXYAY Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sika AG ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, Sika AG showed solid returns over the last few months and may actually be approaching a breakup point.

SXYAY Price Channel

InMed Pharmaceuticals 
InMed Performance
0 of 100
Over the last 90 days InMed Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

InMed Price Channel

Sika AG and InMed Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sika AG and InMed Pharmaceuticals

The main advantage of trading using opposite Sika AG and InMed Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika AG position performs unexpectedly, InMed Pharmaceuticals 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 InMed Pharmaceuticals will offset losses from the drop in InMed Pharmaceuticals' long position.
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The idea behind Sika AG ADR and InMed Pharmaceuticals 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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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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