Correlation Between SGS SA and EMS CHEMIE

Can any of the company-specific risk be diversified away by investing in both SGS SA and EMS CHEMIE 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 SGS SA and EMS CHEMIE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SGS SA and EMS CHEMIE HOLDING AG, you can compare the effects of market volatilities on SGS SA and EMS CHEMIE 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 SGS SA with a short position of EMS CHEMIE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and EMS CHEMIE.

Diversification Opportunities for SGS SA and EMS CHEMIE

0.7

Correlation Coefficient

SGS SA  EMS CHEMIE

Poor diversification

The 3 months correlation between SGS and EMS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and EMS CHEMIE HOLDING AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMS CHEMIE HOLDING and SGS SA 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 SGS SA are associated (or correlated) with EMS CHEMIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMS CHEMIE HOLDING has no effect on the direction of SGS SA i.e., SGS SA and EMS CHEMIE go up and down completely randomly.

Pair Corralation between SGS SA and EMS CHEMIE

Assuming the 90 days trading horizon SGS SA is expected to generate 1.34 times less return on investment than EMS CHEMIE. But when comparing it to its historical volatility, SGS SA is 1.28 times less risky than EMS CHEMIE. It trades about 0.14 of its potential returns per unit of risk. EMS CHEMIE HOLDING AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  57,100  in EMS CHEMIE HOLDING AG on April 22, 2025 and sell it today you would earn a total of  6,700  from holding EMS CHEMIE HOLDING AG or generate 11.73% return on investment over 90 days.

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

SGS SA  vs.  EMS CHEMIE HOLDING AG

SGS SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SGS SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SGS SA may actually be approaching a critical reversion point that can send shares even higher in August 2025.

EMS CHEMIE HOLDING

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMS CHEMIE HOLDING AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EMS CHEMIE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with SGS SA and EMS CHEMIE

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

The idea behind SGS SA and EMS CHEMIE HOLDING AG 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.